Answer: True
Article – Third-party Special Needs Trusts (sometimes referred to as Supplemental Trusts) are not subject to Medicaid payback.
In New Jersey, a Third-Party Special Needs Trust (also called a Supplemental Needs Trust) lets you provide long-term support for a loved one with a disability without affecting their eligibility for benefits like Medicaid or SSI.
The critical difference from a First-Party Special Needs Trust (funded with the beneficiary’s own assets) is that a third-party trust is funded with assets belonging to someone else—such as a parent, grandparent, sibling, or friend—and has no Medicaid “payback” requirement. In a first-party trust, the state must be repaid from remaining assets after the beneficiary’s death. With a properly drafted third-party trust, any remaining funds can go to other family members, charities, or heirs you choose.
These trusts can cover “supplemental” expenses beyond what Medicaid provides—like education, travel, recreation, therapies, and adaptive equipment—without counting against the beneficiary’s benefits. This ensures a better quality of life while keeping vital public assistance intact.
Including a Third-Party Special Needs Trust in your estate plan offers peace of mind and flexibility. Because the rules are complex, consult an attorney experienced in New Jersey special needs planning to ensure your trust is structured for maximum protection.