Special Needs Trusts: What Do I Need To Know?~3 min read
A Special Needs Trust (SNT) in Texas, like in many other states, is a legal tool designed to provide for the supplemental needs of a person with disabilities without jeopardizing their eligibility for government benefits such as Medicaid and Supplemental Security Income (SSI). Here are 7 key points to consider:
- Types of Special Needs Trusts: There are two main types of SNTs: a Third-Party Special Needs Trust and a First-Party Special Needs Trust. The former is funded with assets belonging to someone other than the beneficiary, like a parent or grandparent, while the latter is funded with assets that belong to the beneficiary, such as an inheritance or personal injury settlement.
- Purpose: The primary purpose of a Special Needs Trust is to enhance the quality of life for the person with disabilities by providing for supplemental needs not covered by government benefits. These can include education, recreation, medical and dental expenses not covered by Medicaid, transportation, and more.
- Medicaid and SSI Eligibility: One of the most critical aspects of an SNT is that it allows the beneficiary to remain eligible for Medicaid and SSI benefits, which are means-tested programs. Assets held in a properly drafted and administered SNT are not counted when determining eligibility for these benefits.
- Trustee Selection: Choosing the right trustee is crucial. This person or entity will manage the trust assets and make distributions according to the terms of the trust. The trustee should be financially responsible, have a good understanding of the beneficiary’s needs, and be capable of navigating the complex rules governing SNTs.
- Legal Requirements: Special Needs Trusts in Texas must comply with state and federal laws. It’s essential to work with an attorney experienced in estate planning and special needs planning to ensure that the trust is properly drafted and administered.
- Funding: The trust needs to be adequately funded to meet the beneficiary’s anticipated needs over their lifetime. This can include assets like cash, investments, real estate, life insurance proceeds, and more.
- Trustee Powers: The trustee typically has broad discretion in making distributions from the trust. However, they must act in the beneficiary’s best interests and follow the guidelines laid out in the trust document.
- Monitoring and Review: Regular monitoring and review of the trust’s performance and the beneficiary’s needs are essential. Circumstances may change over time, necessitating adjustments to the trust’s provisions or investment strategy.
- Public Benefits Preservation: Special care must be taken to ensure that distributions from the trust do not jeopardize the beneficiary’s eligibility for government benefits. This includes restrictions on cash distributions and payments for certain types of goods and services.
- Estate Recovery: In Texas, Medicaid has the right to seek reimbursement from a beneficiary’s estate for Medicaid benefits received during their lifetime. Properly structured SNTs can help minimize or avoid estate recovery.
By gaining a comprehensive understanding of Texas Special Needs Trusts, individuals and families can navigate the legal landscape with confidence, ensuring the financial security and well-being of their loved ones with disabilities. Remember, knowledge is key to making informed decisions and securing a brighter future.
Contact Springer & Lyle
If you have questions or require assistance with setting up a Special Needs Trust, contact Daniel Abasolo at 940.387.0404 to schedule a consultation. Our office is located at 1807 Westminster, Denton, TX 76205.
