A Texas Special Needs Trust (often called “Texas Supplemental Needs Trust”) is a way of providing financially for a disabled person.
We all want to make sure that our loved ones have the financial support they need to live happy lives. And, if we have the financial means to do so, we’d especially like to give money to a person incapable of providing for herself. However, sometimes it can actually hurt a person with special needs when a loved one gives a large gift of money.
How can that be?
Individuals with special needs often rely on assistance from public benefits programs. These programs, like Medicaid and Supplemental Security Income (“SSI”), are means-tested. That means the government looks at the applicant’s means for paying bills to determine eligibility for the public benefits. Therefore, if a well-meaning loved one gives a large chunk of money to a person with special needs, that gift may destroy eligibility for the Medicaid or SSI public benefits. This is because, on paper, this person can now afford to pay for his/her own support and doesn’t need Medicaid or SSI any more. If you are thinking of giving an inheritance to a person with special needs, that gift from your estate may also destroy Medicaid and/or SSI eligibility. That’s a scary prospect when the goal was to help!
The good news is that in this instance, you may be able to “have your cake and eat it, too.” Instead of giving the gift outright to the loved one, give it to a Texas Special Needs Trust for the benefit of your loved one. Here’s how it works: You hire a Texas trust lawyer to help you set up the special needs trust, open an account to hold the trust’s funds, and then fund the trust through gifts. The beneficiary of the trust (the person with special needs) will receive support from the trust as needed as determined by the trustee.
You don’t have to make a one-time gift to the Texas special needs trust–you can make many periodic gifts if you want. Also, you can give more than cash. You can give the trustee of the Supplemental Needs Trust other property you own, and the trustee will use that property to benefit the trust’s beneficiary. In this way, you are assured that your loved one will have continued support even after you are no longer able to keep funding the trust yourself. If you want to wait and make a gift to a Special Needs Trust after you pass away, let your estate planning attorney know of this intention so that the attorney can go ahead and draft the trust instrument and integrate the trust into your overall estate plan.
This topic will become more crucial as time goes on. Many of these public benefits programs, like Medicaid, will have budgetary hurdles moving forward and will likely become more aggressive in pursuing individuals with the means to pay for support. That means it’s important to follow all the guidelines and only use approved methods (like a Special Needs Trusts with the assistance of an attorney). Likewise, public benefits programs may also start paying out less as their budgets shrink–which means someone else will have to pick up the tab for your loved ones’ care. It’s smart to plan ahead to make sure that your loved one with special needs will have the financial support he/she needs well into the future.