3B:31-37 Special needs trusts.

3B:31-37. Special Needs Trusts.

Even if a trust contains a spendthrift provision, the following shall apply:

a. Special Needs

(1) "Protected person" means a person who is:

(a) an aged, blind, or disabled individual as defined at 42 U.S.C. s.1382c;

(b) developmentally disabled as defined in section 2 of P.L.1979, c.105 (C.30:1AA-2); or

(c) under age 18, or over age 18 and a full-time student, with serious disabilities that reasonably may prevent the individual from being self sufficient as an adult.

(2) "Special needs trust" means an OBRA '93 trust, as defined in subsection a. of section 3 of P.L.2000, c.96 (C.3B:11-37), or trust governed by a written instrument which:

(a) grants a trustee broad discretion to determine whether and when to distribute;

(b) limits distributions during the trust term to distributions to benefit one or more protected persons, although the trust shall have at least one protected person as beneficiary;

(c) provides that the trustee does not have any obligation to pay the protected person's obligations or fund his support;

(d) does not give the protected person any right to require the trustee to distribute at a specific time or for a particular purpose or to assign or encumber interests in the trust; and

(e) evidences the grantor's intent to supplement rather than replace or impair government assistance that the protected person receives or for which he otherwise may be eligible.

b. Notwithstanding any other provision of this act or other law:

(1) trustees of a special needs trust have broad discretion over distributions;

(2) no creditor of a protected person may reach or attach a protected person's interest in a special needs trust and no creditor may require the trustees to distribute to satisfy a protected person's creditor's claim; and

(3) a special needs trust shall terminate at such time as provided in its governing instrument.

c. A special needs trust shall not be required to repay government aid provided to a protected person unless the aid was provided on the basis that the special needs trust would repay the aid when the protected person dies, or the special needs trust terminates sooner and the special needs trust instrument expressly calls for such repayment. This provision does not apply to a first-party, self-settled OBRA '93 trust as defined in subsection a. of section 3 of P.L.2000, c.96 (C.3B:11-37).

d. Notwithstanding N.J.S.3B:31-35 and N.J.S.3B:31-36, trustees of a special needs trust shall exercise their discretion in good faith to further trust purposes and courts may exercise their equity authority to remedy trustee abuses of discretion.

L.2015, c.276, s.1.