Supplemental Benefits Trust (SBT)
Explore the intricacies of Supplemental Benefits Trusts (SBT) with the Law Offices of Wenarsky and Goldstein, LLC. Learn how SBTs can enhance your estate planning strategy.
Supplemental Needs Trust and Estate Planning
Many people with disabilities require assistance from the government. However, they may be disqualified from receiving Medicaid and other government benefits, such as Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI), if they have income or assets above the eligibility threshold.
One way to financially support a disabled loved one without jeopardizing their eligibility for Medicaid and SSI is establishing a supplemental needs trust (SBT), also known as supplemental needs trust.
If one of your family members has special needs and you’re worried about their eligibility for government financial assistance, it would be beneficial to speak with a special needs lawyer from the Law Offices of Wenarsky and Goldstein, LLC. Our New Jersey legal teams are experienced in all kinds of trusts, including supplemental benefits trusts.
Understanding Supplemental Benefits Trusts
Many means-tested government benefit programs, including SSI and Medicaid, have income and asset limits. If a disabled person’s income or resources exceed these limits, they may be ineligible for benefits.
An SBT is a legal arrangement designed to provide financial support to individuals with disabilities or special needs without jeopardizing their eligibility for means-tested government benefits such as Medicaid or SSI.
These trusts are typically established and funded by a parent, legal guardian, or other third party. A trustee will manage funds held in the trust and use them to pay for the beneficiary’s needs, such as medical expenses not covered by government benefits, education, housing, transportation, recreation, and personal care attendants.
By establishing an SBT, individuals with disabilities can receive supplemental financial support while still maintaining access to crucial government benefits. These trusts provide peace of mind to families and caregivers, knowing that their loved ones will have the resources they need to thrive while preserving their eligibility for essential assistance programs.
Supplemental Benefits Trust vs Special Needs Trust
While the purpose of both SBT and SNT is the same, they are not exactly the same. The difference lies in where the funds come from.
If the funds come from a third party, such as a parent or a friend, an SBT must be established. This is why an SBT is sometimes referred to as a third-party SNT. Third-party SNTs don’t have a payback provision, which states that any remaining assets in the trust after the beneficiary’s death must be used to pay back Medicaid for any received benefits.
On the other hand, if the funds come from the disabled person’s own resources, such as inheritance or a personal injury settlement, then a special needs trust must be established following NJ’s strict regulations. Basically, a special needs trust is self-funded by the disabled beneficiary.
The Legal Framework of SBTs
Because SBTs are not funded using the disabled beneficiary’s assets, they don’t have to conform to federal and New Jersey requirements with respect to self-settled SNTs.
Generally, a special needs trust (SNT) should meet the following conditions:
- The trust beneficiary is disabled as defined under 42 USC 1382c(a)(3)
- The trust must be irrevocable.
- The trust must be for the beneficiary’s sole benefit.
- It is established by a parent, grandparent, legal guardian, or the court.
- Upon the death of the trust beneficiary, the New Jersey Medicaid program must be reimbursed up to the total amount of Medicaid benefits received.
These regulations, especially number 5, don’t apply to SBTs. However, it’s important to draft the trust agreement carefully in order not to substitute government benefits for the trust’s assets.
If you are a family member who wants to leave your assets in favor of a disabled relative, it is best to consult a local and experienced trust attorney.
Can a Supplemental Benefits Trust Be Altered or Revoked?
A Supplemental Benefits Trust (SBT) can be altered or revoked under certain conditions, depending on its type and the terms specified in the written trust agreement. SBTs are designed to supplement government benefits, such as Supplemental Security Income (SSI) and Medicaid, without jeopardizing a disabled person’s eligibility. There are two primary types of SBTs: first-party and third-party SBTs.
A first-party SBT, funded with the disabled beneficiary’s assets, is typically irrevocable. This means it cannot be altered or revoked once established. These trusts are often used to manage assets belonging to the disabled individual to remain eligible for public benefit programs. Upon the beneficiary’s death, remaining trust assets are used to repay Medicaid liens as required by federal law.
Third-party SBTs, funded with assets from family members or other third parties, may offer more flexibility. These trusts can sometimes be altered or revoked, depending on the specific terms outlined in the trust agreement. Third-party SNTs are commonly used in estate planning to provide benefits to a disabled beneficiary without affecting their eligibility for SSI and Medicaid benefits.
The ability to alter or revoke a trust also depends on state law and the inclusion of specific provisions in the trust documents. For instance, a trust agreement may include a payback provision, ensuring that remaining assets are used for the beneficiary’s sole benefit during their lifetime and any remaining assets go to remainder beneficiaries upon the beneficiary’s death.
Working with an estate planning attorney is crucial to ensure that the SBT complies with state and federal laws and meets the disabled person’s needs. This legal arrangement helps maintain the disabled individual’s quality of life by supplementing government benefits while protecting trust assets from being counted as unearned income for benefit programs.
Whether a Supplemental Benefits Trust can be altered or revoked depends on its type, the terms of the trust agreement, and applicable state and federal laws. Consulting an elder law attorney is essential for navigating these complexities and ensuring the trust serves its intended purpose.
Benefits of Establishing an SBT
Supplemental benefits trusts offer several important advantages to family members who are concerned about their disabled loved ones. Among these advantages are the following:
-
The beneficiaries receive financial support without jeopardizing their eligibility to receive government benefits.
-
The persons who put their funds in the trust are reassured that the money will go to the expenses they stipulated in the trust document.
-
Any remaining assets in the trust can go to chosen beneficiaries instead of the state Medicaid agency.
-
Family members have peace of mind knowing that their incapacitated loved ones will be financially secure and have a good quality of living even after they pass away.
-
The assets that the family members will leave are managed professionally.
-
Financial abuse and exploitation are minimized since a legally liable trustee manages the funds.
Setting Up a Supplemental Benefits Trust
If you’re looking to establish an SBT or SNT, it is best to speak with trust lawyers to know what is best for your disabled loved one. The trust document should be properly drafted and in compliance with legal regulations.
The SBT document is better drafted by an experienced and knowledgeable estate planning attorney to ensure its provisions can achieve the desired goals without violating state or federal law.
Choosing the Right Trustee
Choosing a trustee is an important decision that should not be taken lightly. The trustee of an SBT will oversee the disabled individual’s financial needs and ensure that the assets are appropriately managed according to the wishes of the grantor. Here are some considerations in making this decision:
- The right trustee should be trustworthy. While some advise against the designation of a family member, as long as the person has a good reputation and can take their responsibility seriously, they can be a good trustee.
- The trustee should also be able to handle financial affairs properly. If possible, you want someone who has financial management and investment skills.
- They must be aware of and be willing to comply with their responsibilities.
- There should be no conflict of interest.
The Law Offices of Wenarsky and Goldstein, LLC, Can Help
If you’re contemplating estate planning and establishing a supplemental benefits trust, the Law Offices of Wenarsky and Goldstein, LLC, can assist you with your needs.
Our experienced lawyers can draft a trust agreement for the benefit of your disabled loved ones. We know that a well-prepared special needs trust document can significantly benefit your disabled loved one. We take a customized approach to address your concerns when establishing your trust and drafting other estate planning documents.
Contact us today and schedule your consultation!
Call the Law Office of Wenarsky & Goldstein
At the Law Offices of Wenarsky & Goldstein, LLC, our New York and New Jersey attorneys are experienced and knowledgeable in bankruptcy, estate planning and probate, guardianship, special needs planning, and real estate law. To learn more about how we can assist you with your legal needs, call us today at 973-453-2838.
CONTACT US TODAY
