Special Needs Trust

disabled woman setting up special needs trust

A person must own less than $2,000 of resources in order to obtain Medicaid assistance to pay for long-term care.  Both federal and state laws prohibit an individual from gifting assets within five years of the Medicaid application in order to qualify for assistance.  There is an important exception to the gifting rules, however, for a disabled individual who is less than 65 years of age.

According to both federal and state laws, a person who is less than 65 years of age can establish a Special Needs Trust with all of his or her life savings and assets.  If a person acquires assets from an inheritance, divorce, or lawsuit then those proceeds can be placed into a Special Needs Trust for the benefit of that disabled individual.

Federal and state Medicaid laws allow a disabled person who is less than 65 years of age to deposit a portion or all of the assets into a Special Needs Trust.  The Special Needs Trust must be for the sole benefit of the disabled individual.  According to New Jersey law, the trust must specifically state that its purpose is to supplement, and not to supplant, government benefits that the individual may be entitled to receive.  The trust must also be irrevocable and specifically state that upon the death of the disabled individual the State will be notified and must be paid all amounts remaining in the trust up to the total value of the Medicaid benefits that he or she received.  This is known as the “payback” provision.