When a disabled individual relies on government benefits, saving money to provide for their future care can jeopardize those benefits. A special needs trust allows supplemental funds to be set aside for the beneficiary’s needs while maintaining eligibility for government aid.
What is a Special Needs Trust?
A special needs trust is a legal arrangement that holds assets for a disabled beneficiary to be used for their supplemental needs. It provides benefits like:
- Allowing assets to be set aside without affecting eligibility for government benefits
- Paying for expenses not covered by government aid like medical/dental care, housing, education, recreation, etc.
- Protecting inheritances or settlements so they are not counted against resource limits
- Providing ongoing support under the management of a designated trustee
The beneficiary can access the trust funds for quality of life expenses while remaining eligible for needs-based government benefits.
Types of Special Needs Trusts
There are three primary special needs trust structures in Texas:
- First-Party Special Needs Trust – These types of trusts are established by parents for the benefit of a child with disabilities who is under age 65; by an adult with disabilities for his or her own benefit; or through a court order following a personal injury lawsuit.. Contains a payback provision where remaining funds reimburse the state upon the beneficiary’s death.
- Third-Party Special Needs Trust – Funded by third parties like parents or grandparents. Assets can pass to remainder beneficiaries upon the disabled beneficiary’s death.
- Pooled Trust: These trust accounts are managed by a non-profit organization and hold the assets of multiple beneficiaries with disabilities. Pooled trust accounts offer professional management of the trust funds and can provide economies of scale in investment and administrative fees.
SNT Trustees in Texas
Trustees have a fiduciary duty to use discretion when making distributions that improve the beneficiary’s quality of life while preserving eligibility for government benefits. These include:
- Education and training expenses
- Medical and dental care not covered by insurance or government benefits, such as Medicare/Medicaid
- Housing costs including rent, utilities, furnishings
- Therapies, medications, and equipment
- Home adaptations such as wheelchair ramps or lifts
- Transportation costs not covered by government benefits
- Recreation and entertainment expenses
- Vacations
Trustees can be individuals like family members or professional advisors.
Assets for Special Needs Trusts
Special needs trusts are versatile and can include assets like:
- Inheritances or gifts
- Lawsuit settlements or court-ordered payments
- Real estate or other property
- Life insurance and investment accounts
- Vehicles
Creating a Special Needs Trust in Texas
Parents, grandparents, or guardians of a disabled individual can establish a first or third-party special needs trust. To set up a special needs trust in Texas, you will need to:
- Choose a trustee – The trustee is the person who will manage the trust and make sure that the beneficiary’s needs are taken care of. Anyone can be chosen to be the trustee as long as they are over 18 years old and not legally disabled themselves. It is important to choose someone that is trustworthy and who has experience handling finances.
- Draft the trust agreement – The trust agreement is a legal document that outlines how the trust will operate and what its purpose is. Necessary information includes who the beneficiaries are, how much money will be put into the trust, and what the trustee’s duties are.
- Fund the trust – The trust must be funded before it can be used. This can be done by transferring assets into the trust or by setting up a life insurance policy that names the trust as the beneficiary.
- Get government approval – If the trust is being used to supplement government benefits, approval will be needed from the Social Security Administration or other relevant agency.
After the trust is set up, the trustee will be responsible for managing it and making sure that the beneficiary’s needs are taken care of.
Key Takeaways
Special needs trusts can be an invaluable planning tool for disabled individuals and their families in Texas. By allowing supplemental funds to be set aside in a trust structure, beneficiaries can maintain eligibility for vital government benefits while still providing for expenses that enhance quality of life.
With proper establishment by experienced advisors, first-party, third-party, or pooled special needs trusts enable families to rest assured knowing their disabled loved one will have support to meet both their basic and supplemental needs.
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Disclaimer
The content of this website is for informational purposes only and should not be construed as legal advice. The information presented may not apply to your situation and should not be acted upon without consulting a qualified probate attorney. We encourage you to seek the advice of a competent attorney with any legal questions you may have.
