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Special Needs Trusts
A special needs trust (SNT) is an important part of planning for a relative with a disability or mental illness. Done properly, an SNT can provide for your loved one's needs without jeopardizing his or her eligibility for crucial benefits, such as SSI and Medicaid. There are several options for setting up an SNT and an attorney knowledgeable in this area should be consulted regardless of the option chosen. Remember that any trustee, individual or corporate, is entitled to a commission for their services and that fees will apply to bank accounts and investment accounts owned by the trust, as they would for a personal banking or brokerage account.
1. If the assets are substantial (usually $500,000 and above) you may wish to approach a trust company or a financial institution's trust department to act as trustee. Such institutions will serve as trustee for large trusts and will provide the investment management as well. Some institutions will not handle SNTs, so be sure to check.
2. You may wish to name a family member as trustee. An attorney would need to create an SNT for your family member. You will want to make sure that the family member has some financial sense, is willing to learn about the requirements of SNTs, and will be trustworthy enough to handle funds that are left in trust for your loved one. The trustee must ensure that the money is invested properly, that the money is used only for the beneficiary's needs, and that the money is not used in such a way as to jeopardize the beneficiary's government benefits.
3. For smaller trusts, you may opt to open an account in the PLAN/NJ Community Trust.
4. Or you may have an attorney create a separate SNT and appoint PLAN/NJ as trustee. PLAN/NJ has the same responsibilities as an individual trustee, whether the money is in the Community Trust or in a separate SNT. An attorney drafts the trust and charges a fee for that service, whether separately or as a part of a larger estate plan. The assets in the trust are invested by a financial manager hired for that purpose. The investments utilized depend on the size of the trust and the projected needs of the beneficiary. PLAN/NJ charges the greater of the New Jersey statutory rate (currently 6% of income and 0.5% of principal) or $1,000 per year.
These are very brief discussions of the available trust options but PLAN/NJ would be happy to speak with you about your family's needs in more detail. Please contact PLAN/NJ's Trust Coordinator, Nancy Dilliplane, at (908) 575-8300, Ext. 15 for more information or to schedule an appointment for a consultation.
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