Special Needs CEU Presentation Call our office today. Ask for Mr. Niemann to personally discuss your New Jersey Special Needs Trust. Toll-free at (855) 376-5291 or e-mail at fniemann@hnlawfirm.com.

1. Planning for a Loved One
With Special Needs
and
Estate Planning for Parents of
Persons with Developmental and
Other Severe Chronic Disabilities

2. Presented by
Fredrick P. Niemann, Esq.
Elder Law, Asset & Estate Protection
Planning, Medicare, Medicaid and
Veteran’s Benefit Assistance Lawyers
www.specialneedstrustnewjersey.com
www. njelderlawcenter.com
www.njmedicaidlawattorney.com
Visit me at
Hanlon Niemann, PC
3499 Route 9 North, Suite 1F
Freehold, NJ 07728
Phone: (888) 800-7442
fniemann@hnlawfirm.com

3. Fredrick P. Niemann, Esq.
Fredrick P. Niemann offers his clients over 30
years of accomplished practice in the law. He is a
member of the National Academy of Elder Law
Attorneys, the Guardianship and Conservatorship
Committee of NAELA, Monmouth County
Probate and Estate Committee and the Monmouth
County Chancery Practice Committee. Mr.
Niemann is one of the few attorneys in New Jersey,
accredited by the Veteran’s Administration, to
apply for Aid and Attendance benefits for Veterans
and/or their spouses.

4. Legal Wit
What’s wrong with lawyer jokes? Lawyers don’t
think they’re funny, and nobody else thinks
they’re jokes.
How can you tell when a lawyer is lying? His lips
are moving.

5. Cont.
What’s the difference between a good lawyer and
a great lawyer? A good lawyer knows the law. A
great lawyer knows the judge.
The first thing we do, let’s kill all the lawyers.
Shakespeare

6. Facts of Life
1. Persons with disabilities are living longer and public
benefits are often necessary.
2. There is no guarantee that public benefits will provide
adequate resources over the disabled person’s lifetime.
3. There is no guarantee that public agencies will provide
services and advocacy over the disabled person’s
lifetime.

7. What Does Planning Involve?
Preserving your loved one’s financial
security and quality of life
Addressing key issues: Those key issues are:
Understanding the role of public benefits today
Making assumptions about public benefits in the
future
Using estate planning/trusts to protect your assets for
the financial security of your loved one’s future

8. Part 1:
Understanding Public Benefits

9. Public Benefits at a Glance
Financial Benefits
Supplemental Security Income (SSI)
 Means tested: Income and asset limitations for eligibility
Social Security (SS)
&
Social Security Disability Insurance
(SSDI)
 Not means tested but subject to work credits
or parents’ eligibility

10. Public Benefits at a Glance
Medical Benefits
Medicaid
 Automatic with SSI
 Must apply for SS/SSDI for first 2 yrs
Medicare
 After two years of SSDI

11. Supplemental Security Income (SSI)
Must meet SSA’s definition of “disability” and
have limited assets/income
Provides monthly income for food/shelter
Gateway to Medicaid / in-home support
services

12. Social Security (SS) / Social Security
Disability Insurance (SSDI)
Social Security for individuals:
 Disabled before age 22 and
 With parents eligible based on their work record if retired,
disabled or deceased
SSDI for individuals with work record
Social Security benefits may reduce or eliminate
SSI benefits if greater than monthly SSI benefit

13. Medical Assistance & Support
Medicaid:
 SSI recipients automatically receive Medicaid
 Covers “medically necessary” services, equipment,
hospitalization
 In-home services needed to live at home: personal care,
housekeeping, cooking, transportation to doctors
 SS & SSDI individuals must apply for Medicaid
Medicare:
 Medical coverage, including doctors, hospital, skilled care
 Individuals with SS or SSDI eligible for Medicare after 2 years
of eligibility

14. How Benefits Work Together
SSI
Medicaid
SSDI
Medicare

15. Part 2:
Making Decisions About the Future

16. Typical Timeline for a Child
With a Disability
Upon Attaining Age 18
 Deeming of parents’ income and resources to
the disabled child ends.
 Child becomes eligible for public benefits based
upon evidence of disability and the child’s low
income and resources – parents’ resources not
considered in determining child’s eligibility.

Parental decision-making authority ends Guardianship may be necessary.

17. Providing for Persons
with Disabilities
Pitfalls to commonly used eligibility
strategies:
¦ Uniform Gift to Minors Act Accounts (UGMA
or POD Accounts)
¦ Unstructured Beneficiary Designations
¦ No planning at all

18. Uniform Gifts to Minors Act
(UGMA) Accounts
¦Once the child takes control of the account ( age
18 or 21), the child may then use the money for
purposes other than education -- regardless of the
custodian’s wishes.
¦
UGMA accounts are considered available
resources for purpose of SSI eligibility.

19. Unstructured Beneficiary Designations
Naming an SSI, beneficiary Medicaid recipient or
minor child as the beneficiary of a retirement plan
(401k,IRA, etc.), life insurance policy annuity or
any other resource, investment, asset (ie.
brokerage account, CD’s, money market, etc.) will
cause a reduction or elimination of public benefits.

20. No Planning at All
Dying intestate (without a will or trust) will usually leave
all or a portion of the estate of a single parent, person to
the decedent’s children.
¦
Any child receiving SSI or Medicaid will lose
eligibility until the inheritance is either spent down,
converted to a exempt resource, or placed in a Special
Needs Trust.

21. Providing for Persons
with Disabilities:
Special Needs Trust Basics
Purpose - To preserve the disabled person’s
eligibility for needs-based governmental
benefits while providing assets which may be
used to supplement public benefits in order to
improve the disabled person’s quality of life.

22. Elements of a
Special Needs Trust
A Special Needs Trust (SNT) is drafted
specifically so trust assets are not considered
to be “countable resources” in determining
the disabled person’s eligibility for public
benefits based on need.

23. Elements of a
Special Needs Trust
The SSA describes a discretionary trust
as “a trust in which the trustee has full
discretion as to the time, purpose and amount
of the distributions.”
If the beneficiary has no discretion or
mandatory rights over trust income or
principal of the trust distributions, the trust is
not counted in determining SSI eligibility.

24. Elements of a
Special Needs Trust
Assets in a SNT will not count as a resource
for public benefits purposes.
The assets in the SNT may be used to
supplement the beneficiary’s needs not
covered by public benefits without a
reduction or elimination of those public
benefits.

25. Examples of Permissible
SNT Expenditures










Education
Travel Expenses
Newspaper and Magazine Subscriptions
Personal Care Services
Home Care Services
Non-covered Medical Expenses
Vacations
Companions
Entertainment
National Review but not the NY Times

26. Does Every Person with a
Disability Need a Trust?
•
•
A trust is appropriate if it helps to achieve
greater independence or reliable asset
management.
Always keep in mind that a trust by its nature
means a loss of control over the funds by the
disabled beneficiary (This can be a good theory
ie; prodigal son or daughter)

27. Types of Special Needs Trusts
1.
Self-Settled Trust
2.
Third Party Trust
This is a critical planning technique for
parents, grandparents, and individuals who
want to gift to actual/potentially handicapped
persons, or person with severe medical
illnesses.

28. Special Needs Trusts vs.
Support Trust
•
If needs-based public benefits are either not
needed or not anticipated by the disabled
beneficiary, no need to establish a SNT.
• If public benefits are not an issue, it may be
appropriate to establish a support trust to provide
financial oversight and administration for the
disabled person’s behalf.
A. (ie: a traditional support trust for non
child with non-qualifying disabilities
B. But… what about the future? What
/individual’s health or disability
significantly?
SSI child or
if that child
deteriorates

29. Self-Settled SNT
1. Established with the assets of the disabled person
- proceeds of a personal injury award or other
court action, inheritances or gifts received before
the creation of the trust.
2. Must be established by a parent, grandparent,
guardian or a court.
3. The disabled person can be the only beneficiary
of a self-settled SNT. No remainder beneficiaries
may be named in the trust instrument.

30. Self-Settled SNT (cont’d)
4. Self-settled SNT must be inter vivo ( meaning exist
prior to death) and be irrevocable.
5. Medicare and Medicaid liens must be paid before
funding.
6. Self-settled SNT can be established only if the
beneficiary is under age 65.
7. “Pay-back” provision to the state of NJ or Medicare
is required by state and federal law.
A. For Medicaid/ Medicare benefits actually
paid

31. Third Party SNT
1. Established with assets owned by a third party
(ie: parents, grandparents, aunts, uncles) for
the benefit of the disabled person.
2. Usually established and funded by the parents,
relatives or friends of the disabled adult child
as part of an estate or gifting plan.
3. Other children can be named as remainder
beneficiaries after death of disabled person.

32. Third Party SNT (cont’d)
4. Third Party SNT may be revocable and inter vivos,
or irrevocable and testamentary.
5. No need to pay Medicare or Medicaid liens before
funding.
6. No age limit for disabled beneficiary.
7. “Pay-back” to the State of NJ, Medicaid and
Medicare provision not required (doesn’t matter if
beneficiary is an adult or minor)

33. The Golden Rule
The golden rule in SNT planning - the trustee
should make payments on behalf of the beneficiary
directly to third party vendors for equipment or
services which are not food or shelter. For
example, distributions directly to a retailer for a
radio or television, to an airline for a plane ticket,
or to a companion/aide for services rendered are
not income to the beneficiary.

34. Objectives Should be Expressed in The
SNT and Memorandum of Intent
The trust should set out broad instructions
that are not likely to change.
Example - “I wish that my child live as
independently as possible in the least restrictive
environment”.

35. Objectives Should be Expressed in the
SNT and Memorandum of Intent
The memorandum of intent should reflect
more timely and detailed instructions.
Example - “I have inspected the Monmouth County
Independent Living Center and, in the event of my
incapacity or death, I believe that this facility meets
my son David’s needs. Please make sure that David
is monitored regularly by the care manager, especially
regarding his medication because he is prone to
frequent side effects”.

36. Follow-Up Steps:
(1) Select Resources
Select a combination of resources that will
guarantee adequate funds for the disabled child’s
lifetime, such as insurance, savings, investments,
family assistance, etc., and change the ownership
of each asset to the trustee of the SNT.

37. Follow-Up Steps:
(2) Remove Child as Beneficiary
Remove the disabled child as the beneficiary from all of
the parents’, and others relatives’, financial programs, i.e.,
employer sponsored retirement plans, IRAs, KEOGHSs,
life insurance policies, joint accounts of all types,
brokerage and financial.
A. This is 1 of the 10 Commandments for asset
protection planning.

38. Follow-Up Steps:
(3) Meet With Caregivers
Hold a meeting with all interested parties, i.e., the
Guardian, all Trustees and Successor Trustees and
all siblings, to review the estate planning
documents, discuss plan and management of trust
assets.

39. Case Study: Nathan
Current situation:
18-year-old with autism
Lives with mom
Income from work programs, SSI, Social
Security (from dad who is deceased)
Limited personal assets (clothing, tv)
Qualifies for Medicaid

40. Case Study: Nathan
Future situation:
Who will make health care decisions?
Who will make financial decisions?
Where will he live?
How will his medical expenses be paid?

41. What Plan Could
Nathan’s Mom Make?
Possible Options:
Make no decisions/plans
Leave money to Nathan
Disinherit Nathan
Leave money to a future caregiver
Establish third-party SNT for Nathan
Establish first-party SNT for Nathan

42. Example: Distributions from a
Supplemental Needs Trust Directly
to an SSI Beneficiary
Jill is the trustee of a special needs trust established by her
deceased mother, Paula, for the benefit of Paula’s disabled
daughter and Jill’s sister, Anne. Anne’s living expenses,
including rent, food, transportation and clothing, total
approximately $2,000 per month. Jill sends Anne a check
on the first of every month for $2,000 so Anne can pay her
expenses. Since Anne is receiving cash income in excess
of her monthly SSI benefits, she loses her SSI. Since
Anne received Medicaid based on her SSI payment, she
also loses Medicaid.

43. Example: Distributions from a
Supplemental Needs Ttrust to Third Party
Vendors for Food or Shelter
Jill is the trustee of a testamentary supplemental needs
trust established by Joan under her last will and
testament for her adult disabled daughter, Pamela.
Pamela receives SSI, Medicaid, food stamps and
services from DDD. Pamela lives in an apartment. Jill
signed the lease as trustee of the SNT and pays all rent
directly to the landlord. The rental payments will
result in a reduction, but not the elimination, of
Pamela’s SSI benefits.

44. Example: Distributions from a SNT to
Third Party Vendors for Items Which are
Not Food or Shelter
Jill, a disabled adult, receives SSI. Joan is the trustee
of a special needs trust established by Jill’s parents
for her benefit. Jill likes to read the National Review
not the (New York Times.) Joan arranges with the
local newspaper distributor to deliver the National
Review not the (New York Times) to Jill on a daily
basis, including Sundays, and pays the bill directly to
the newspaper distributor. This is not considered
income, and will not affect Jill’s SSI benefits.

45. Follow-Up Steps:
(4) New Wills for Parents
Prepare Last Will and Testaments for parents
excluding the child from receiving any portion of
the parents’ estate outright and free of trust which
may cause the disabled child to lose government
benefits.

Create a Discretionary Supplemental Needs
Trust to protect future quality of life for the child.


46. Periodic Update and Review
The Estate Plan should be periodically reviewed to:
• Ensure all assets either are owned by the SNT, or
SNT is named as the beneficiary of the assets.
A. The importance of beneficiary designations
• To update trustees and persons representatives and
power of attorney
• Changes in the beneficiary’s condition or eligibility
for benefits.
• Changes in your economic situation.

47. Part 3:
Creating an Effective Plan
for Your Child / Loved One

48. What Steps Should You Take Today?
Step 1: Envision Your Child’s Future
Planning ahead makes a difference:
 Where and with whom will your child live?
 What type/level of care will be required?
 Will a guardian/conservator be necessary?
 Who else will be involved?
 What kind of lifestyle is desired?
 What unforeseen challenges could arise?

49. What Steps Should You Take Today?
Step 2: Create a Memorandum of Intent
Lays out goals/expectations:
 Details preferences, needs, wishes, both medical and personal
 Lists key people in child’s life
Helps guide:
 Family members
 Trustees
 Caregivers
 Others

50. What Steps Should You Take Today?
Step 3: Estimate Income & Expenses
Monthly income:
 SSI, SSDI, Social Security, earned/unearned income
Monthly living expenses:
 Housing, food, transportation, medical, recreation, etc.
 Consider how any shortfall will be met
Income - Expenses = Shortfall

51. What Steps Should You Take Today?
Step 4: Utilize a Third-Party SNT
Provides supplemental funds for living expenses
not covered by other income sources
May be established by parents:
 Through will
 Through living trust
“Living” SNT lets others contribute
Trustee has discretion over distributions

52. The SNT Trustee Responsibilities
What are the trustee’s responsibilities?
Invests/manages assets
Distributes funds
Keeps books
Files tax returns
Hires advocates and care managers, etc., as needed

53. Selecting an SNT Trustee
Who should be the trustee?
 Parent with professional co-trustee
 Corporate or other professional trustee
 Successor trustee

54. What Parents Should Do
Create Memorandum of Intent
Calculate future financial need
Establish SNT through will or living trust
Fund SNT with life insurance
Name SNT as beneficiary of accounts, plans,
etc.
Reduce taxable estate

55. What Your Child Should Do
Sign Advance Directives, if legal capacity
Have a legal guardian appointed:
 When child without mental capacity becomes an adult and
parents want to maintain legal responsibility
 Court appoints legal guardian

56. What If Your Child Has Assets?
Establish a First-Party SNT:
Provides funds for living expenses not covered
by other income sources
Maintains eligibility for public benefits
Must be established by parent, grandparent, legal
guardian or the court
State must be reimbursed from the trust for all
Medicaid expenses

57. Get Started Today
Understand your child’s eligibility for public
benefits.
Make plans for the future to maximize public and
private resources for your child’s benefit.
Make the SNT a key part of your estate plan.
Contact a special needs attorney for the assistance you need.
Fredrick P. Niemann, Esq.
NJ Elder Law and NJ Special Needs Trust Attorney
Hanlon Niemann, PC
3499 Route 9 North, Suite 1F
Freehold, NJ 07728
Phone: (888) 800-7442
fniemann@hnlawfirm.com
www.specialneedstrustnewjersey.com
www.njelderlawcenter.com

58. THANK YOU FOR ATTENDING.
QUESTIONS / COMMENTS?

59. ADMINISTRATION OF
SPECIAL NEEDS TRUSTS
Presented by
Fredrick P. Niemann, Esq.
Hanlon Niemann, PC
3499 Route 9 North, Suite 1F
Freehold, NJ 07728
www.hnlawfirm.com
www.specialneedstrustnewjersey.com
fniemann@hnlawfirm.com
Elder Law, Asset & Estate Protection
Planning, Medicare, Medicaid and
Veteran’s Benefit Assistance Lawyers
R. 1:40 Approved Mediator by the NJ Supreme Court
Accredited Attorney by the US Veterans Administration for
Veterans Benefits

60. Trust Administration
A Special Needs Trust (SNT) must not only
be properly drafted and funded, but must
also be properly administered. Improper
distributions from a properly drafted and
funded SNT can result in the loss of public
benefits for the beneficiary of the trust.

61. Self-Settled, Third Party
and Marital SNTs
The rules of administration apply to selfsettled, third party and marital SNTs.

62. Distributions May Be Income
Even if the principal of a SNT is not
considered a resource by public benefit
providers because the trust was properly
drafted, distributions from the trust
MAY be considered income to the
disabled beneficiary if not properly
made.

63. Basic Rules for
Trust Administration
These basic rules define the types of
distributions which may be made from a SNT
and the impact of each type of distribution on
the public benefits of the trust beneficiary. It
is critical that trustees are aware of these rules.

64. Types of Trust Distribution
1. Direct Payments to the Beneficiary.
2. Payments to third party vendors for food,
clothing or shelter.
3. Payments to third party vendors for items
which are not food, clothing or shelter.

65. Direct Payments to the
Beneficiary are NOT Permitted
Cash paid directly from a SNT to a disabled
beneficiary of needs-based public benefits is
considered to be unearned income and will
affect eligibility or the amount of any benefit
received.

66. Example: Distributions from a
SNT Directly to an SSI Beneficiary
Jill is the trustee of a special needs trust established by her
deceased mother, Paula, for the benefit of Paula’s disabled
daughter and Jill’s sister, Anne. Anne’s living expenses,
including rent, food, transportation and clothing, total
approximately $2,000 per month. Jill sends Anne a check on
the first of every month for $2,000 so Anne can pay her
expenses. Since Anne is receiving cash income in excess of
her monthly SSI benefits, she loses her SSI. Since Anne
received Medicaid based on her SSI payment, she also loses
Medicaid.

67. SSI - ISM + PMV
1. SSI is intended to pay for a beneficiary’s food,
clothing and shelter.
2. Disbursements from a SNT by a trustee to a third
party vendor to cover food, clothing or shelter costs
result in the receipt of in-kind support and
maintenance (ISM) by the beneficiary.
3. ISM is valued under the presumed maximum
value (PMV) rule under which the SSI monthly
benefit is reduced by one-third (1/3rd) of the federal
benefit amount, or the actual value received,
whichever is less.

68. Payments to Third Party Vendors
for Food, Clothing or Shelter
It is often appropriate to make distributions
from a SNT which constitute ISM even
though the beneficiary will have a reduction in
public benefits to the extent of the PMV
because the SSI benefit alone is inadequate to
provide an appropriate level of food, clothing
and shelter for the beneficiary.

69. ISM + Medicaid Eligibility
As long as SSI eligibility is maintained,
even at a reduced level, Medicaid eligibility
is maintained.

70. Example: Distributions from a SNT
to Third Party Vendors for Food,
Clothing or Shelter
Jill is the trustee of a testamentary special needs trust
established by Joan under her last will and testament
for her adult disabled daughter, Pamela. Pamela
receives SSI, Medicaid, food stamps and services
from DDD. Pamela lives in an apartment. Jill signed
the lease as trustee of the SNT and pays all rent
directly to the landlord. The rental payments
constitute ISM and reduce Pamela’s SSI by one-third
(1/3rd), the PMV.

71. Payments to Third Party Vendors
for Items Which Are Not Food,
Clothing or Shelter
Distributions of this kind do not result in any
reduction of benefits so they are the most
desirable types of distributions for a trustee to
make.

72. Example: Distributions from a SNT to
Third Party Vendors for Items Which are
Not Food, Clothing or Shelter
Jill, a disabled adult, receives SSI. Joan is the trustee
of a special needs trust established by Jill’s parents
for her benefit. Jill likes to read the New York Times.
Joan arranges with the local newspaper distributor to
deliver the New York Times to Jill on a daily basis,
including Sundays, and pays the bill directly to the
newspaper distributor. This is not considered
income, and will not affect Jill’s SSI benefits.

73. Types of Distributions Not Considered
Food, Clothing and Shelter
• Home improvements, repairs, and maintenance by
outside source
• Tools to perform home improvements or repairs
• Installation of burglar alarm or monitoring/ response
system home
• School tuition, books, and supplies
• Health and life insurance premiums

74. Types of Distributions Not Considered
Food, Clothing and Shelter (Cont’d)
• Entertainment, including books, magazines and
newspapers; trips, movies, plays, museums and sporting
events; audio/video equipment; hobby supplies, etc.
• Vacation travel, but not lodging, since that is shelter
• Purchase and maintenance of car, or bus passes
•
Household goods and other items of personal
property of reasonable value
• Payment for cleaning supplies and paper products

75. Types of Distributions Not Considered
Food, Clothing and Shelter (Cont’d)
• Telephone expenses
• Dental care, physical therapy, massages, support services,
and other medical costs not covered by any public benefit
programs
• Home care services not covered by another program
• Durable medical equipment, such as wheelchairs

76. Examples of Trust Distributions
Which Will Reduce SSI Benefit
•
Shelter-related expenses (mortgage payments, real
property taxes, heating and cooling bills, electricity, water,
sewage, garbage collection)
• Groceries or meals
• Items of clothing
• Cash for any purpose

77. Other Types of Distributions Which
May Effect Public Benefits Eligibility
Income and resources of parents are deemed
to minor children. Trust distributions to
parents may be considered income to them
and, therefore, may be deemed to minor
children. If the children are public benefit
recipients, distributions to parents may effect
the eligibility of children.

78. Other Rules
Governing Distributions
Distributions should be made by the trustee to
accomplish the intention of the grantor as set
forth in the trust instrument.
Distributions should be made to provide for
the beneficiary’s needs.

79. Credit Cards
In appropriate cases, it makes sense to consider
providing the trust beneficiary with a credit card.
Credit cards are loans and loans are not income.
Even if the credit card is used for food, clothing, and
shelter, it is still a loan. The credit card could be in
the name of the individual beneficiary or the name of
the trust.

80. SNT as Owner of Home
• Home is an “exempt” asset.
• A beneficiary of public benefits living in a home
which he owns or which is owned by a SNT is NOT
considered to be receiving ISM in the form of rentfree shelter.

81. SNT as Owner of Home
Advantages
1. Many beneficiaries of SNTs do not have the
capacity to manage residential real estate.
2. The home is protected from creditors and from
the temptation to borrow against the home.
3. If beneficiary is married, trust ownership protects
the home in the event of a divorce.

82. SNT as Owner of Home
Disadvantages
1. If a self-settled SNT owns a home, the home is
likely to be lost upon the death of the beneficiary due
to the required pay back provision.
2. Family members or others who occupy the home
must pay their pro rata share of the expenses.

83. SNT as Owner of Home
• If a self-settled SNT is involved, parents should
purchase the home. Will avoid pay back and no pro
rata contribution needed.
• If the SNT beneficiary is under age 55 and not
likely to live to age 55, home should be owned by the
beneficiary since NJ only seeks recovery of Medicaid
benefits paid after age 55 from the estate of a
deceased beneficiary.

84. SNT as Owner of a Home
If possible, home should be purchased in cash.
Payment of mortgage is ISM to the disabled person,
each monthly payment being valued at no more than
the PMV.

85. SNT as Owner of a Home
Payment of other household expenses by a SNT may
also constitute ISM. The following 10 items are the
only expenses considered in determining whether the
beneficiary has received ISM:
Food
Gas
Mortgage
Electricity
Real Estate Taxes
Water
Rent
Sewer
Heating Fuel
Garbage Removal

86. Additional Household Expenses
If the trust pays for improvements or renovations to
the home, e.g., renovations to the bathroom to make
it handicapped accessible or installation of a
wheelchair ramp or assistance devices, etc., the
individual does not receive income.
Disbursements from the trust for improvements
increase the value of the resource and, unlike
household operating expenses, do not provide ISM.

87. SNT as Owner of a Vehicle
1. Often a handicap-equipped van is required.
Who should own the van?
2. Title - held by trust or family member?
- liability for accidents
- “pay-back” provision
3. Insurance - critical to have adequate insurance
- trust may pay insurance costs
4. Document transportation needs of disabled
person for Medicaid.

88. SNT as Owner of a Vehicle
The difficulty with a SNT owning a van is that it
is often impossible to obtain insurance for the
trust. A simple solution - have the trust lease the
van and pay all expenses, including insurance,
gas, maintenance, etc.

89. SNTs and Section 8 Housing
The Special Needs Trust should never pay the
beneficiary’s rent in Section 8 Housing.
Distributions from the trust are considered income
to the tenant regardless of whether the distribution is
made directly to the beneficiary or to a third party.

90. Recap of Distribution Rules
for Special Needs Trusts
• Do not pay cash to beneficiary
• Do not pay cash to family of beneficiary under 18
years of age
• Distribute to third party vendors
• Retain public benefits counsel
• Retain care manager

91. Recap of Distribution Rules
for Special Needs Trusts (Cont’d)
• Always pay:
--Income taxes
--Trustee fees
--Attorney fees
--Administrative costs
--All regularly recurring expenses

92. Recap of Distribution Rules
for Special Needs Trusts (Cont’d)
• Try to avoid payment of :
--Mortgage
--Rent
--Real estate taxes
--Homeowner’s insurance
--Utilities: Gas, Electric, Heat, Water, Sewer
--Garbage removal
--Food
--Clothing

93. First Steps for Trustees
Review the document with an attorney familiar with Special
Needs Trusts
Meet with the beneficiary and assess his or her needs
Identify the public benefits which the beneficiary is receiving
or for which he/she may be eligible
Gather all of the assets subject to the trust
Get tax identification number for the trust
Meet with any care managers, advisors, or fiduciaries
required by the trust agreement
Seek assistance and hire advisors

94. How to Identify the
Beneficiary’s Needs
1. Trustee should develop a wish list of goods and
services to be purchased for the beneficiary.
- List should be prepared by the beneficiary and
the beneficiary’s friends and family
2. Trustee should obtain information from the
beneficiary’s school records or life care plan.
3. Care manager performs an annual evaluation of
the beneficiary which will help identify his/her needs.

95. Trustee Duties and Responsibilities
1. Trustees should hold periodic meetings to receive
input and make decisions concerning distributions.
2.
Expectations should be established.
3. An agenda should be maintained and minutes
provided to participants.

96. Trustee Duties and Responsibilities
(Cont’d)
4. Self-Settled SNTs - the trustee must balance the
long and short-term needs of the beneficiary.
5. Third Party SNTs - trustee must consider the
interests of the remainder beneficiaries.

97. Choose a Management System and
Team to Carry Out Your Intent
Many SNTs fail because of ill-equipped Trustees.
A system of checks and balances works best in trust
administration.
Divide the duties into three categories:
• Financial
• Personal, including advocacy and care management
• Accountability

98. Selection of Management
Team Members
Parent, sibling or friends
Attorney
Financial Institution
Nonprofit Organization
Co-Trustees
Social Worker or Care Manager

99. SNT Trustee:
Financial Manager
The Trustee should be a person with expertise in
money management and disability programs.
Institutional trustees may provide investment
acumen. Although a parent often wants a sibling to
act as trustee, there is often an inherent conflict of
interest. Since the sibling is usually named as a
remainder beneficiary, he/she has an incentive to
accumulate rather than distribute trust assets.

100. Investments
Prudent Investor Rule - requires trustee to invest and
manage trust assets “as a prudent investor would, by
considering the purposes, terms, distribution
requirements and other circumstances of the trust.
N.J.S.A. 3B:20-11.3 Generally, a growth and income
investment strategy is appropriate for a SNT.

101. SNT Trustee:
Public Benefits Expert
In addition to the usual challenges involved in
managing a trust (financial acumen, record keeping,
etc.), the trustee of a SNT has a more difficult job.
He/She must know the rules of the applicable
governmental programs, and must make and keep
track of payments to third party vendors.

102. Trustee Duties: Surety Bond
If there is no corporate trustee, a trust document
may include provision requiring a surety bond for the
individual.
Since the trustee has very broad
discretion as to how the trust income and principal
are to be used, a surety bond might be considered as
a way to safeguard trust assets. The bond should be
in an amount equal to the trust assets. The amount
the bond should be reviewed annually.
The
premiums can be paid by the trustee from trust
income.

103. Trustee Duties: Accountings
The trust document may also provide for annual
accountings by the trustee. This enables the trust
beneficiary and non-trustee family members to
scrutinize the performance of the trustee. Public
benefit providers always require accountings from
trustees of self-settled SNTs.

104. Trustee Duties: Investments
The trustee has an obligation to invest the trust
assets in a manner designed to achieve the objectives
of the trust. As a general rule, the duties of a trustee
cannot be delegated. However, the Prudent Investor
Act authorizes the delegation of the investment
functions by trustee and relieves the trustee of
liability for investment performance under certain
circumstances.

105. Trustee Duties:
Investments (Cont’d)
An analysis must be made of the degree of risk which
the beneficiary can tolerate, as well as the cash-flow
needs of the beneficiary.
Expenses, such as
insurance premiums for a home or a van, medical
expenses not covered by other sources and
necessities not covered by other sources, must be
considered in any analysis of the beneficiary’s cashflow needs. The trustee must educate the beneficiary
and his or her family as to what are appropriate
investment vehicles and expectations.

106. Trustee Duties: Recordkeeping
It is crucial that the trustee maintain accurate records
of assets, income and disbursements. SSA reserves
the right to review all disbursements made to or on
behalf of the beneficiary. The trustee’s records must
clearly reflect the payee of each distribution and the
purpose for which it is made. If a challenge is made
by SSA that a distribution constitutes income to the
beneficiary, the trustee must have accurate records to
refute the challenge.

107. Trustee Duties:
Reporting Requirements
SSA requires certain reporting for all SSI recipients.
The trustee must complete these reports in a timely
manner, so that the beneficiary’s eligibility will
continue. Existence of the SNT must be reported to
SSA and a copy provided, if requested. Any change
in the beneficiary’s address, employment, living
arrangements or income must be reported, including
distributions which exceed $5,000.

108. Trustee Duties: Appeals
If the beneficiary receives notice of an adverse
action, the decision must be appealed within ten days
in order to maintain benefits during the appeal
period. The trustee should request copies of all
communications from SSA to the beneficiary.

109. Trustee Duties: Budgeting
A trustee should establish a budget for the trust and
the beneficiary at the outset of the relationship, and
annually thereafter. The trustee will estimate the
annual income on a conservative basis. Any large
expenditures, such as for housing or transportation,
should be deducted prior to estimating income.
Taxes and trustee’s fees must then be deducted. The
remaining income should then be broken down for
use by the trustee in an appropriate manner on a
monthly basis.

110. Trustee Duties:
Tax Responsibilities
The trustee is responsible for preparing and filing all
federal and state tax returns for the trust. The
trustee should also prepare and file all federal and
state tax returns for the beneficiary in situations
where the beneficiary is unable to file those tax
returns him/herself.

111. Trustee Protector
• A Trust Protector oversees how the trust is
managed, without day-to-day involvement.
• The Trust Protector reviews accountings and
assessments from the care manager.
• The Trust Protector may hire and fire the trustee
or care manager without cause.
• A Trust Protector can be a professional, family or
friends.

112. THANK YOU FOR ATTENDING
PLEASE COMPLETE THE
WORKSHOP SATISFACTION SURVEY
BEFORE LEAVING.