Texas parents with special needs children are constantly faced with the question of how to provide for the child’s expenses. This question is especially vexing when the issue is estate planning. Special needs children often rely on a variety of state and federal programs to provide financial assistance, but eligibility for these programs can often by undercut by estate plans that do not take into account the limits on the child’s income and assets that can affect eligibility. The solution to this problem is often provided by a special needs trust.
Special needs children rely on government programs such as Supplemental Security Income, Social Security Disability Insurance, Medicare and Medicaid. These programs limit eligibility to persons who own less than $2,000 in assets. If the child’s parents are well off, they often believe that they can simply leave the majority of their assets to their special needs child. Doing so can often have the opposite effect: the sudden increase in a child’s net worth can make them ineligible for these programs.
The solution is a special needs trust. The basic idea of a special needs trust is the creation of a trust that is dedicated exclusively to paying for the special needs child’s medical care and support. Two kinds of special needs trusts are possible under Texas law: the General Support Special Needs Trust and the Supplemental Care Special Needs Trust. Both trusts need a third party to act as trustee and make decisions about using trust assets to pay for the beneficiary’s general support and medical care. The advantage of a special needs trust is the exclusion of the trust assets from the beneficiary’s personal assets. Thus, a special needs child who has or will receive a significant bequest can preserve eligibility for the various assistant programs by ensuring that the bequest is made to a special needs trust of the proper type. The trustee of the special needs trust can be a family member, friend or professional trustee.
A special needs trust document should be drafted by an experienced estate planning attorney to ensure that the terms of the trust are consistent with the Texas statutes that govern such trusts and the rules of the government program that the beneficiary relies upon.