Texas Special Needs Trusts

Families with special needs children must exercise extra care in making their estate plans. This is true whether their special needs child is still a minor or now an adult, and particularly so when the child is – or in the foreseeable future will be — receiving needs-based public benefits such as SSI or Medicaid. While planning considerations for such a child will vary depending upon the child’s age, competency, and other family considerations, the goal is always the same: parents want their estates utilized to enhance and enrich the life of their special needs child while maintaining the child’s enrollment in essential public benefits programs. These goals can be met through the use of a properly prepared special needs trust.

The essence of all special needs estate planning is to ensure that the portion of the parents’ estate which passes to their special needs child at the time of their death is not considered an “available asset,” as defined by public benefit agencies. Parents must be mindful of both income and principal, as too much monthly income, as well as too much “cash,” can negatively impact their child’s future eligibility for benefits.

Purpose

Special needs planning works to preserve public benefits for the disabled child while supplementing and enhancing the quality of the child’s life. This type of planning is useful for many different purposes, including

  • lifetime money management for the benefit of the disabled child;
  • protecting the child’s eligibility for public benefits; and
  • ensuring a pool of funds available for future use in the event public funding should cease or be restricted.

Planning Options

The options available to families in making an estate plan for a special needs child who is receiving needs-based public benefits include the following:

  • Disinherit the child. This is the simplest option, but it does nothing to accomplish the purpose of enriching the life of the special needs child.
  • Give the estate to the brothers and sisters. At the parents’ death the entirety of the estate is distributed to the child’s siblings, with the understanding that they will “take care of” their disabled brother or sister. There are inherent risks with such an approach, including claims by the siblings’ creditors, bankruptcy, divorce, mismanagement of funds, etc.
  • Leave an inheritance to the disabled child. The outcome of this planning option will be the almost certain negative impact on the child’s continued eligibility for publicly funded benefits. In the worst case scenario, the child may be rendered ineligible for SSI and Medicaid. The key benefit is Medicaid, as this program represents the child’s ability to access not only essential health care but many other public assistance programs.
  • Leave an inheritance in a Special Needs Trust. This last option is preferred by most families in their efforts to provide and ensure a positive outcome for a special needs child. By using a properly drafted – and properly administered – Special Needs Trust, the child will continue to qualify for public assistance programs that would otherwise be unavailable to the child, especially the “means tested” programs that require the child to meet strict financial eligibility criteria. A Special Needs Trust works because the assets held in the trust are not “available” to the child. Under no circumstances can the special needs child force the trustee to make trust money available to the child.