RED BANK, NJ – Families planning long-term financial security for a loved one with disabilities often weigh the differences between a special needs trust and a separately drafted discretionary support trust under New Jersey law. New Jersey special needs trust attorney Christine Matus of The Matus Law Group (https://matuslaw.com/discretionary-support-trust/) is offering guidance on how each trust structure works, when one may be preferable, and how distribution choices affect means-tested government benefits.
According to New Jersey special needs trust attorney Christine Matus, the central question for families is whether the trust is structured to help preserve Supplemental Security Income or Medicaid eligibility, or whether broader trustee discretion is the priority. “The phrase ‘discretionary support trust’ is not a fixed legal category in New Jersey that automatically determines how a trust is treated,” Matus explains. “What matters is how the trust is drafted and administered, the source of the funds, and how distributions are actually made in practice.”
New Jersey special needs trust attorney Christine Matus notes that a special needs trust is designed to help a person with a disability without automatically disqualifying that individual from means-tested benefits. A first-party special needs trust intended to qualify for the Medicaid trust exception under 42 U.S.C. Section 1396p(d)(4)(A) must contain the beneficiary’s own assets, be irrevocable, be for the beneficiary’s sole benefit, be established before age 65, and include Medicaid payback language. A third-party trust funded with someone else’s assets, such as those of a parent or grandparent, follows different rules.
The firm explains that trustees of first-party special needs trusts in New Jersey carry significant administrative responsibilities. Attorney Matus points out that these trustees must submit annual and final accountings and provide 45 days’ advance notice to the Division of Medical Assistance and Health Services before any single expenditure exceeds $5,000, before any payment that would substantially deplete trust principal, or before total annual payments to one person or entity exceed $5,000.
“A discretionary support trust may offer greater flexibility for distributions, but those distributions can still affect Supplemental Security Income or Medicaid eligibility depending on how the trust is drafted and administered,” Matus emphasizes. The firm notes that as of September 30, 2024, the Social Security Administration no longer counts food as in-kind support and maintenance for SSI purposes, although shelter-related support may still affect eligibility in some situations.
Matus highlights several scenarios where a discretionary support trust may be appropriate, including cases where the beneficiary does not receive means-tested benefits, where the family wants the trustee to make distributions for shelter costs that would otherwise reduce SSI, where the beneficiary is over age 65 and cannot use a first-party special needs trust, or where the family does not want remaining trust assets subject to first-party Medicaid payback at the beneficiary’s death. The firm notes that some Monmouth County families use both structures, with one trust drafted to preserve means-tested benefits and another used for distributions handled under a different standard.
The team at The Matus Law Group also explains the importance of trustee selection. Attorney Matus advises that families typically choose between a professional trustee, such as a bank trust department or licensed fiduciary, and a family member who better understands the beneficiary’s daily needs. Some families appoint both, with a professional handling financial management and a family member serving as a trust advisor or co-trustee.
The firm also reviews potential downsides families should consider before creating a discretionary support trust. “These trusts can require significant ongoing oversight, including investment management, recordkeeping, evaluating distribution requests, and tax compliance,” Matus notes. Other considerations include possible family tension over discretionary distributions, reduced direct control once the trust is established, ongoing professional fees, and tax issues that depend on how the trust is structured.
For New Jersey families weighing whether a discretionary support trust, a special needs trust, or a combination of both fits their planning goals, working with an experienced attorney can help align the trust structure with the family’s long-term care concerns and benefit eligibility considerations.
About The Matus Law Group:
The Matus Law Group is a Red Bank, New Jersey-based law firm focused on estate planning, real estate, and special needs planning. Led by attorney Christine Matus, the firm has served families throughout Monmouth County and across New Jersey since 1995. For consultations, call (732) 785-4453.
Email: admin@matuslaw.com
Media Contact
Name
The Matus Law Group
Contact name
Christine Matus
Contact phone
(732) 785-4453
Contact address
125 Half Mile Rd #201A
City
Red Bank
State
NJ
Zip
07701
Country
United States
Url
https://matuslaw.com/monmouth-county-nj/
