Review your old special needs trusts before it’s too late

Laws change. Sometimes, federal law stays the same and state laws implementing it change. State statutes may remain the same but the state regulations change. State regulations may stay the same, but the executive branch agency issues advisory memoranda which change the procedures. That’s what occurred back in 2001 when the State of New Jersey Division of Medical Assistance and health Services (DMAHS) (“Medicaid”) adopted a set of specific administrative, procedural, technical requirements for first party special needs trusts which are occasionally called “(d)4(A) trusts” by reference to a section of the federal Social Security Act. 42 USC 1917(d)4(A). The State’s regulation is found at N.J.A.C. there be a payback clause so that and 4.11(g) in particular.

The federal statute which undergirds this regulation was enacted long before 2001, and has not changed. So you may find that the Trust that adequately protected your loved one’s SSI or state Medicaid benefits — including eligibility for services through the NJ Division of Developmental Disabilities or DDD — is rejected, because it doesn’t have the technical provisions that were adopted years after the trust was written. The technical provisions include things such as a requirement to notify the State if an expenditure of greater than $5,000 is made, or a requirement that certain information about the Beneficiary be stated in the trust document. There is no change in the historic requirement that the trust be solely funded with assets of the disabled individual, or that there be a payback clause so that the State be the first remainder beneficiary. So rejection of an old non-conforming trust can result in a termination from benefits, or a denial of an application. In cases of termination from benefits, there is the risk of being assessed for “wrongfully paid benefits.”

There is a remedy. Some trusts contain provisions that allow the trustee to amend the trust in whatever way is necessary to conform it to requirements that would still preserve the eligibility of the disabled beneficiary and would not reduce the beneficiary’s interest. Other trusts require that amendments be made by court order. The message is that if you are a trustee of a special needs trust that was written in the 1990’s, this would be a good time for a legal review to see whether any modification is required in order to protect your beneficiary.

Call us for advice on creation and amendment of Special Needs Trusts, and for Medicaid applications and appeals … 732-382-6070

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