Will I Lose My Section 8 Housing or Medicaid If I Create a Special Needs Trust?

HNWElder Law, Special Needs Trusts for Minor Children and Adults

  • Many people qualify for section 8 housing financial assistance and Medicaid
  • Creation of a special needs trust will preserve these public benefits without a loss of eligibility

A Special Needs Trust Protects Public Benefits

I was recently questioned by a prospective client about losing eligibility for section 8 housing and Medicaid because of a personal injury lawsuit which settled and awarded him $250,000.00. I explained how a correctly structured Special Needs Trust will preserve both his section 8 housing and Medicaid benefits. This is important because the client has four (4) minor children he is supporting.

Section 8 Housing

Section 8 housing does not consider a Special Needs Trust to be an asset since the money is held in trust and can only be distributed by the trustee. However, this is where the nature, type and frequency distributions from the trust become the most important factor.

Income from a trust is not counted under section 8, so long as it is not regular. The key to utilizing a special needs trust in connection with a beneficiary who is receiving Section 8 Housing is to be sure that the distributions from the trust are irregular and sporadic.

For example, if the trustee pays a $200 utility bill on a monthly basis, the payment may be treated as regular income and increase the rental co-pay payment of the tenant. By budgeting creatively, a special needs trust can be administered by paying large one-time expenditures and leaving the regular recurring expenses for payment by the trust beneficiary. For example, if the section 8 apartment needs to be refurnished, the trustee could pay for all of the furniture in one check. This would not be a recurring item. If the tenant needed a vehicle, the trustee could purchase a vehicle. Again, this is not a recurring expenditure.

For individuals in the greater Monmouth/Ocean/Middlesex County areas the income limits for 4 persons are as follows:

These figures increase annually

Extra low-income        $27,250.00
Very low-income         $45,450.oo
Low-income                 $66,100.00

Based on the client information provided, our client would fall into the extra low-income category which would make sense since their only source of income is social security disability payment. The household income of the family is $1054+$262+$232=$1,548 per month x12 months= $18,576 per year. To remain eligible, the client cannot receive more than $47,524 in income from the trust ($18,575+$47,524=$66,100). We can plan for this in the trust as it is administered.

To discuss your NJ Special Needs Trust matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Section 8 Housing, Medicaid and Special Needs Trusts Attorney

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