Glossary of New Jersey Trust Terms
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Special Needs Trust
A general term that denotes any one of several types of trusts, all of which preserve eligibility for government assistance benefits and create a fund that can be used to supplement the beneficiary’s quality of life.
Third Party Trust
A trust that is established by someone other than the trust beneficiary and with funds in which the beneficiary (a third party) has no ownership interest. Examples of persons who are third parties include the parents, grandparents, aunts, uncles, brothers, sisters, cousins, friends, or any other independent party, except for a spouse. One principal advantage of these trusts is that they are not required to contain payback provisions, which means that assets can be passed on to other family members at the trust beneficiary’s death free of any Federal or State liens and/or claims.
First Party Disability Trust
A trust established for the sole benefit of the beneficiary by the beneficiary himself/herself, the beneficiary’s parent, grandparent, legal guardian, or a court. The beneficiary must be under age 65 when created, and the assets used to fund the trust must belong to the beneficiary. Any assets remaining in the trust at the time of the beneficiary’s death must be paid over to the state for the expenses incurred for the benefit of the disabled person.
Pooled Trust
A trust established and administered by a non-profit association with trust sub-accounts established for the sole benefit of the individual beneficiaries by the beneficiary’s parent, grandparent, legal guardian, a court, or the individual beneficiary. The beneficiary does not need to meet any age requirement, the assets used to fund the trust must belong to the beneficiary, and any remaining assets at the beneficiary’s death must either be retained in the trust by the non-profit or used to reimburse the State for all medical benefits provided to the beneficiary.
Medicaid
Refers to all the various means-tested government programs that are operated in conjunction with the Federal government to provide medical and personal care assistance. New Jersey has numerous child and adult Medicaid programs intended to provide benefits to meet the different needs of its disabled residents. Like Supplemental Security Income (SSI), Medicaid programs have income and asset limits that must be satisfied and maintained as a condition to receiving program benefits. While Medicaid resourse limitations are generally consistent, income limits can vary considerably from program to program.
Medicare
Provides health insurance for the aged and for individuals determined to be disabled. Unlike Medicaid, Medicare is a social insurance program, not a means-tested program. It consists of two components, Part A and Part B. Part A provides inpatient hospital coverage, skilled nursing home care, and home health care. Part B provides inpatient hospital services, out-patient hospital care, physical therapy, medical equipment, and prosthetic devices. With Part B, a monthly premium based on a person’s prior annual income must be paid to maintain enrollment. Some people may be in dual eligibles of both Medicare and Medicaid
OBRA Trusts
Trusts created pursuant to legislation passed under the Omnibus Budget Reconciliation Act of 1993 (OBRA 93) and codified at 42 U.S.C. §1396p(d). OBRA Trusts include (d)(4)(A) Trusts, also called first party or special needs trusts; (d)(4)(B) Trusts, also called Income or Miller Trusts; and (d)(4)(C) Trusts, also called Pooled Trusts.
Patient Responsibility
A term that is applicable when someone is receiving Medicaid benefits under the Institutional Care Program, MLTSS, which are the Medicaid programs in New Jersey that help pay for long-term nursing home care, or residential placements. Everyone who receives long-term care benefits is responsible for paying a portion of the overall cost. The portion that each person must pay is called their “patient responsibility”, or “contribution to care”. “Patient responsibility” is determined by adding all gross income together and then subtracting a personal needs allowance. A “contribution to care” is approximately one-third of the person’s income. The individual receiving long-term care must pay his or her patient responsibility or contribution to care each month, and Medicaid and/or DDD pays the remaining balance.
Social Disability Income (SSDI)
An entitlement program that operates very much like Social Security old age and retirement benefits because eligibility is partially based on paying into the system for an appropriate number of quarters or collecting on a parent’s work history. If enough quarters have been paid, receipt of SSDI benefits is then conditioned on a determination of disability by the Social Security Administration rather than upon reaching retirement age.
Special Needs / Supplemental Needs
Refers to services and/or goods that are not provided by means-tested government benefit programs. Because this definition of special needs is directly related to the technical eligibility requirements of each program, trust distributions that may be perfectly appropriate for one trust beneficiary may be entirely inappropriate for a different trust beneficiary who is eligible for different means-tested government benefit programs.
Supplemental Security Income (SSI)
A needs-based Federal program that is administered by the Social Security Administration. The determination of disability that the Social Security Administration must make is the same determination that is made for SSDI. Unlike SSDI, however, SSI has income and resource limits that must be satisfied and maintained as a condition to receiving program benefits. In many states, including New Jersey, eligibility for SSI automatically qualifies the individual for Medicaid benefits. Medicaid eligibility is required for DDD eligibility.
Fredrick P. Niemann Esq.
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Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Special Needs Trust Attorney