New Hampshire: How Can You Provide For a Special Needs Loved One?

Navigating Special Needs Trusts in New Hampshire: A Comprehensive Guide

For families in New Hampshire with a loved one who has special needs, estate planning takes on an additional layer of complexity and critical importance. While the desire to provide for a child or family member with a disability is universal, simply leaving assets directly to them can inadvertently jeopardize their eligibility for essential government benefits such as Supplemental Security Income (SSI) and Medicaid. This is where a Special Needs Trust (SNT), also known as a Supplemental Needs Trust, becomes an indispensable tool. It's a specialized legal arrangement designed to hold assets for the benefit of a person with a disability without disqualifying them from means-tested public assistance programs.

Understanding the intricacies of SNTs within the framework of New Hampshire law and federal regulations is vital. This article will provide actionable legal guidance, explore common scenarios, highlight potential pitfalls, and outline the steps necessary to establish a robust Special Needs Trust tailored to your family's unique situation in the Granite State.

Why a Special Needs Trust is Crucial for New Hampshire Families

Many government assistance programs, including SSI and Medicaid, are "means-tested," meaning eligibility depends on the individual's income and countable assets. If a person with a disability has more than a very modest amount of assets (typically $2,000 for an individual), they can lose access to these critical benefits. This asset limit often presents a dilemma for families who wish to leave an inheritance or gift money to their loved one with special needs.

A properly drafted Special Needs Trust provides a solution by holding assets for the benefit of the individual with a disability. The assets within the SNT are not considered "countable assets" for benefit eligibility purposes, allowing the beneficiary to receive financial support for their supplemental needs while maintaining their eligibility for vital government assistance programs. These trusts are not intended to replace government benefits but rather to supplement them, enhancing the beneficiary's quality of life.

Understanding the Two Main Types of Special Needs Trusts

SNTs primarily fall into two categories, distinguished by who funds them and whether a "Medicaid payback" provision applies.

First-Party Special Needs Trust (Self-Settled SNT or (d)(4)(A) Trust)

A First-Party SNT is established with assets that belong to the individual with a disability. This commonly occurs when an individual receives:

• 🎁 An inheritance directly in their name.
• 💰 A personal injury settlement or award.
• ⚖️ Court-ordered damages.
• 💸 Back pay from Social Security benefits.

Key characteristics of a First-Party SNT in New Hampshire include:

• 📜 Funding Source: Assets owned by the beneficiary.
• 🚫 Irrevocability: It must be irrevocable, meaning it cannot be changed or terminated easily once established.
• 👴 Age Limit: It must be established before the individual reaches age 65. The trust must be established by the individual's parent, grandparent, legal guardian, or a court.
• ⚕️ Medicaid Payback: This is a crucial distinction. Upon the death of the beneficiary, any remaining funds in a First-Party SNT must first be used to reimburse the State of New Hampshire (or any state that provided Medicaid benefits) for medical assistance provided to the beneficiary. Only after this reimbursement is made can any remaining funds be distributed to other named beneficiaries.

Hypothetical Case: Sarah's Accident Settlement

Sarah, a 30-year-old New Hampshire resident with a developmental disability, was injured in a car accident and awarded a personal injury settlement of $150,000. She relies on SSI for income and Medicaid for her medical care. If this money were paid directly to her, she would immediately lose her SSI and Medicaid benefits. To avoid this, her legal guardian worked with an estate planning attorney to establish a First-Party Special Needs Trust. The $150,000 was transferred into this trust. Now, the funds can be used for Sarah's supplemental needs (e.g., specialized equipment, therapy, travel, enrichment activities) without affecting her public benefits. However, upon Sarah's passing, any funds remaining in the trust will first be used to repay New Hampshire Medicaid for services rendered during her lifetime.

Third-Party Special Needs Trust

A Third-Party SNT is funded with assets that belong to someone other than the individual with a disability. This is the most common type of SNT used in estate planning and is typically established by parents, grandparents, or other family members.

Key characteristics of a Third-Party SNT include:

• 👨‍👩‍👧‍👦 Funding Source: Assets contributed by a third party (e.g., parents, grandparents, siblings).
• ✅ No Age Limit: Can be established at any age for the beneficiary.
• 🚫 No Medicaid Payback: This is a significant advantage. Because the assets never belonged to the beneficiary, there is no requirement to repay Medicaid upon the beneficiary's death. Any remaining funds can be distributed to other named beneficiaries, providing a legacy for other family members or charities.
• 📝 Flexibility: Can be created during the grantor's lifetime (inter vivos trust) or through a will (testamentary trust).

Hypothetical Case: The Smith Family's Legacy Plan

Mr. and Mrs. Smith, New Hampshire residents, have a son, Michael, who is 25 and has significant special needs, relying on SSI and Medicaid. They want to ensure Michael is cared for after they're gone and plan to leave a substantial portion of their estate to him. Instead of leaving the assets directly to Michael, their attorney advises them to establish a Third-Party Special Needs Trust through their wills. Upon their passing, $500,000 of their estate will be directed into this trust for Michael's benefit. This ensures Michael's eligibility for SSI and Medicaid remains intact while providing funds for additional care, therapies, and enriching activities. Crucially, upon Michael's death, any remaining funds in the trust will pass to his siblings as designated by Mr. and Mrs. Smith, without any Medicaid payback obligation.

The Critical Role of the Trustee

The trustee is the cornerstone of any Special Needs Trust. This individual or entity is legally responsible for managing the trust assets and making distributions for the beneficiary's sole benefit, all while adhering to the complex rules of public benefit programs. Choosing the right trustee is paramount.

Responsibilities of a Trustee in New Hampshire:

• 🛡️ Fiduciary Duty: To act solely in the best interest of the beneficiary.
• 📜 Trust Document Adherence: To strictly follow the terms outlined in the trust document.
• 💰 Prudent Investment: To manage and invest trust assets wisely to ensure longevity.
• 📊 Record-Keeping: To maintain meticulous records of all income, expenses, and distributions.
• 🔄 Benefit Rule Compliance: To understand and stay updated on the ever-changing rules of SSI, Medicaid, and other government benefits, ensuring distributions do not jeopardize eligibility.
• 🤝 Collaboration: To work effectively with family members, caregivers, and service providers.

Potential trustees include family members, professional fiduciaries, or corporate trustees (banks or trust companies). While a family member might seem like a natural choice, they may lack the necessary legal and financial expertise, or the time to manage the trust effectively. Professional or corporate trustees offer expertise and impartiality but come with associated fees. In New Hampshire, it is common to name a family member as a co-trustee alongside a professional, or to name a professional as a successor trustee.

What an SNT Can Pay For: Permissible Expenditures

The purpose of an SNT is to provide for "supplemental needs" – those items and services that government benefits do not cover. The goal is to enhance the beneficiary's quality of life. Permissible expenditures generally include:

• 🎓 Education and Vocational Training: Tutoring, special courses, job coaching.
• 🏥 Medical and Dental Expenses: Not covered by Medicaid or other insurance (e.g., specialized therapies, experimental treatments, prescription co-pays).
• 🪑 Personal Care and Assistance: In-home care, personal attendants.
• 🏠 Housing-Related Expenses (Indirectly): While direct payment for food and shelter can reduce SSI, SNTs can pay for rent or mortgage if the beneficiary doesn't receive SSI, or pay for home modifications, utilities, property taxes, or furniture. This is a nuanced area requiring careful trustee management.
• 🚗 Transportation: Vehicle purchase or modification, public transportation, ride services.
• 🎮 Recreation and Entertainment: Camps, vacations, tickets to events, hobbies, club memberships.
• 💻 Electronics: Computers, internet access, communication devices.
• 👚 Clothing and Personal Items: Haircuts, toiletries.
• ⚖️ Legal and Accounting Fees: Related to trust administration.
• 🐾 Pet Care: If beneficial to the individual.

Legal Warning: Direct payment by the SNT for food and shelter (rent, mortgage, utilities, groceries) for an SSI recipient can cause a reduction in their SSI benefits. Trustees must carefully navigate these distributions, often providing funds for other needs to avoid affecting the "in-kind support and maintenance" calculation for SSI.

Pooled Special Needs Trusts in New Hampshire

For some families, especially those with smaller asset amounts or those who prefer professional management without the high fees of an individual corporate trustee, a Pooled Special Needs Trust can be an excellent option. In New Hampshire, non-profit organizations administer these trusts. Individual accounts are managed within a larger pool of funds, providing professional investment management and administrative services.

• 🧩 Professional Management: Managed by an experienced non-profit organization.
• 📉 Cost-Effective: Often a more affordable option, especially for smaller trusts.
• 🔄 No Age 65 Limit (for First-Party funding): If a First-Party SNT is established by the individual with a disability themselves (or their guardian) and is managed by a pooled trust, the age 65 limit for self-settled SNTs does not apply.
• ⚕️ Medicaid Payback: For First-Party accounts within a pooled trust, the Medicaid payback rule still applies. However, sometimes the remainder can stay with the non-profit organization for the benefit of other individuals with disabilities, depending on the trust agreement.

New Hampshire families should research available pooled trusts and consult with their attorney to see if this option aligns with their needs.

ABLE Accounts vs. Special Needs Trusts: A New Hampshire Perspective

The Achieving a Better Life Experience (ABLE) Act introduced another valuable tool for individuals with disabilities. ABLE accounts allow eligible individuals to save money without jeopardizing their eligibility for most government benefits. New Hampshire residents can open ABLE accounts through programs offered by various states. While similar in purpose to SNTs, there are key differences:

• 💵 Contribution Limits: Annual contributions are limited (currently $18,000 per year for 2024).
• 📈 Asset Limit: If the account balance exceeds $100,000, SSI benefits may be suspended until the balance drops below this threshold.
• 🗓️ Age of Onset: Eligibility requires the disability to have occurred before age 26 (though legislation is pending to raise this to age 46).
• 🧑‍💼 Beneficiary Control: The beneficiary can typically manage their own ABLE account.
• ⚕️ Medicaid Payback: Like First-Party SNTs, ABLE accounts are subject to Medicaid payback upon the beneficiary's death.
• 📝 Simplicity: Generally simpler to establish and administer than an SNT.

Many New Hampshire families find that combining an ABLE account with a Special Needs Trust offers the best of both worlds. An ABLE account can be used for smaller, routine expenses with easier access, while an SNT can hold larger sums and provide for more complex, long-term needs, and is less restricted by annual contribution limits or the age of onset of disability.

Compensation Ranges and Settlements: Protecting Awards with SNTs

When an individual with a disability in New Hampshire receives a significant personal injury settlement, an inheritance, or other large sum of money, the immediate concern is how to protect that money while preserving their eligibility for public benefits. This is precisely where a First-Party Special Needs Trust becomes essential.

There are no "typical awards" for SNTs themselves. Rather, an SNT is the legal vehicle that manages settlements that can range from tens of thousands of dollars for minor injuries to millions for catastrophic cases. The key legal advice here is that any substantial award received by a beneficiary of means-tested government benefits must be directed into a properly established First-Party SNT. Failure to do so will result in the loss of crucial benefits like SSI and Medicaid until the funds are spent down to the asset limit.

A New Hampshire court often mandates the creation of such a trust when approving a settlement for a minor or incapacitated adult. An attorney specializing in both personal injury and estate planning can ensure that the settlement funds are appropriately structured into an SNT from the outset.

Common Mistakes to Avoid in New Hampshire Special Needs Planning

Even with the best intentions, families can make critical errors that compromise their loved one's future. Here are common mistakes to avoid:

1. 🚫 Failing to Plan: The most significant mistake is doing nothing at all.
2. 🎁 Direct Gifts or Inheritances: Leaving money or assets directly to a person with a disability will almost certainly cause them to lose benefits.
3. ✍️ Improperly Drafted Trust: Using generic online forms or an attorney unfamiliar with SNTs can lead to a trust that fails to meet federal and state requirements, invalidating its purpose.
4. 👨‍👩‍👧‍👦 Choosing the Wrong Trustee: Selecting a trustee who is unreliable, lacks financial acumen, or misunderstands benefit rules can severely harm the beneficiary.
5. 💸 Improper Funding: Failing to transfer assets into the SNT or funding it incorrectly.
6. 🔄 Lack of Coordination: Not ensuring the SNT integrates seamlessly with other estate planning documents like wills, powers of attorney, and guardianship papers.
7. ❌ Ignoring State-Specific Rules: While SNTs are federal constructs, their administration and state Medicaid payback rules have nuances.

Steps to Take to Establish a Special Needs Trust in New Hampshire

Establishing an SNT is a complex legal process that requires specialized knowledge. Here are the actionable steps:

1. 📞 Consult an Experienced New Hampshire Estate Planning Attorney: This is the most critical first step. Seek an attorney with specific expertise in special needs planning and an understanding of NH law.
2. 📊 Gather Information: Compile comprehensive details about the beneficiary's disability, current benefits, financial resources, anticipated needs, and family dynamics.
3. 🧩 Determine the Type of SNT: Your attorney will help you decide whether a First-Party, Third-Party, or Pooled SNT is most appropriate for your situation.
4. 🧑‍⚖️ Select a Trustee: Carefully choose an individual or entity that can fulfill the demanding responsibilities of a trustee. Consider alternates.
5. 📝 Draft the Trust Document: Your attorney will prepare a legally sound trust document that complies with all federal and New Hampshire state laws, specifically including language that prevents the trust assets from being counted for benefit eligibility.
6. 💰 Fund the Trust: Transfer the designated assets into the SNT according to the trust's terms. This step is crucial; a trust is only effective if it holds assets. For First-Party SNTs, this must be done before age 65.
7. 📅 Regular Review: Periodically review the trust document with your attorney to ensure it remains aligned with current laws, the beneficiary's needs, and your family's circumstances.

Legal Warnings and Risks

• 🚨 Benefit Disqualification: The primary risk is a poorly drafted or managed SNT that results in the loss of government benefits.
• ⚖️ Trustee Mismanagement: An inexperienced or dishonest trustee can lead to depletion of funds or misuse of assets.
• 📜 Changing Laws: Laws governing public benefits and trusts can change, requiring ongoing monitoring and potential amendments to the trust.
• 🚫 Tax Implications: While SNTs offer significant benefits, there can be tax considerations. Proper planning is essential.

In New Hampshire, the commitment to providing for a loved one with special needs is a profound one. A properly structured Special Needs Trust is not just a legal document; it's a testament to that commitment, offering peace of mind and financial security for the future.

Disclaimer: This article provides general information about Special Needs Trusts in New Hampshire and is for informational purposes only. It is not intended as legal advice and should not be relied upon as such. Laws governing estate planning, special needs trusts, and public benefits are complex and subject to change. For advice specific to your individual situation, you should consult with a qualified New Hampshire estate planning attorney.