N.J. Supreme Court Grants Certification To Review State’s Refusal To Permit Retired Firefighter To Name Special Needs Trust As Beneficiary Of Pension For His Disabled Child

Recently, the New Jersey Supreme Court granted a Petition for Certification I filed asking the Court to review a decision of the appellate division denying a request by my client, a retired fireman, to designate as beneficiary of his public pension death benefits a special needs trust he established in his Last Will and Testament. This is the second time the Supreme Court has granted certification and accepted the case for review.

Thomas Saccone is a retired Newark, NJ fireman with a severely disabled adult child named Anthony. Anthony lives with his parents, is unable to work, has been found to be totally disabled by the Social Security Administration, and for many years has received Supplemental Security Income (SSI) and Medicaid, public benefits based on need. These public benefits are critical in meeting Anthony’s care needs.

Tom retired in 2000 and was approved for benefits from the Police and Firemen’s Retirement System (“PFRS”), effective December 1, 2000. In order to structure his estate plan to provide for Anthony after Tom’s death without jeopardizing Anthony’s eligibility for needs-based public benefits, Tom executed a Last Will and Testament containing a testamentary special needs trust (“SNT”), and left his entire estate to the SNT in his will. Anthony is the sole beneficiary of the SNT.

In August 2008, by way of beneficiary designation, Tom asked the PFRS to pay the survivor benefits to which Anthony would be entitled upon Tom’s death to the SNT established under Tom’s will in order to protect Anthony’s eligibility for public benefits. Those death benefits included the payment of pension benefits to the retired member’s widow/er and children (the “public pension death benefit”).

The PFRS denied the request based on N.J.A.C. 17:4-3.5, as amended eff. 4/3/06, which prohibits a retiree from designating a primary or a contingent beneficiary for the receipt of the retiree’s accumulated pension contributions in the event of the retiree’s death. The pension board said:

[It c]ould not comply with your request to pay a trust, instead all monthly [public pension death] benefits must be paid to a named beneficiary or the check could be sent to ‘in care of’ anyone designated to act as the trustee for the trust.

Thereafter, Tom appealed the PFRS decision administratively to the Division of Pensions and Benefits, which affirmed the denial, and then to the Appellate Division of New Jersey’s Superior Court, which affirmed the decision of the Division of Pensions and Benefits. Thereafter, the New Jersey Supreme Court granted our Petition for Certification and “summarily reversed” the Appellate Division, remanding the case back to the PFRS to decide the case on the merits. (I blogged about the Saccone case through the Supreme Court’s reversal of the appeals court’s first decision here.)

On remand, the Board again concluded that Tom was not permitted to designate the SNT as a beneficiary of his public pension death benefits. Tom again appealed to the Appellate Division of the New Jersey Superior Court, which scheduled oral argument in the case at Rutgers Law School in Newark, NJ. (I blogged about the oral argument before the Appellate Division here.) Thereafter, the Appellate Division again affirmed the PFRS Board’s decision denying Tom’s request to designate a testamentary SNT as beneficiary of his public pension death benefit. The appeals court concluded that the Board did not violate public policy in denying Tom’s application, and suggested that there were other ways the public pension death benefit could be distributed to Anthony without jeopardizing Anthony’s public benefits. (The most recent Appellate Division decision in this case is annexed here.)

We then filed a second Petition for Certification to the New Jersey Supreme Court. To support the Petition, we offered the following reasons why certification should be granted, among others:

Certification is being sought in this matter to address an issue of general public importance: a parent/public employee’s right, through the use of a special needs trust as an estate planning tool, to engage in public benefits planning for a disabled child. A practical interpretation of the pension legislation that permits Anthony’s share of pension death benefits to be paid to the special needs trust would honor the public policy favoring special needs trusts, while having no fiscal effect on PFRS.


The matter in issue herein has far-reaching and troubling policy implications. … The pension death benefit in issue is … “an automatic spousal/child benefit that is payable upon the retiree’s death.” … [T]he amount of the monthly pension death benefit [will] exceed the Supplemental Security Income income limit. …Thus, … upon a retiree’s death, a pension death benefit will automatically be paid each month to the surviving child; if that surviving child is disabled and receiving public benefits, that automatic monthly pension death benefit will most likely disqualify that child from continued public benefits. … Unless this Court reverses the Appellate Division, public retirees will be powerless to prevent the PFRS from taking automatic action that could cause the retiree’s disabled children to lose the public benefits that are vital to their well-being.

A public employee’s right to conduct public benefits/estate planning for a disabled child, and the impact of the pension death benefit on disabled children of public retirees, are matters of public importance. However, these precise issues have not been addressed by this Court. This matter of great significance must be settled by this Court, in the interest of justice.

On March 13, 2013, the Supreme Court entered an Order granting our Petition for Certification. The case will now be heard by the Supreme Court and a decision will be rendered on the merits by the highest court of our State.

UPDATED ON DECEMBER 1, 2013: Four organizations filed motions seeking permission to file amicus curiae, or friend of the Court, briefs. All motions were granted. The organizations which the Supreme Court permitted to participate in the lawsuit are: the National Academy of Elder Law Attorneys, the Special Needs Alliance, the National Academy of Elder Law Attorneys – New Jersey Chapter, and the Guardianship Association of New Jersey, Inc.  The briefs filed by several organizations are annexed here – Amicus Brief and Appendix of the Special Needs Alliance and Brief of Amicus Curiae National Academy of Elder Law Attorneys – New Jersey Chapter and the Guardianship Association of New Jersey, Inc.

UPDATED ON JANUARY 1, 2014: The Supreme Court of New Jersey scheduled oral argument in the case on Monday, February 3, or Tuesday, February 4, 2014 at the Hughes Justice Complex in Trenton, NJ.