Special Needs Planning

How to Use a Trust to Care for a Loved One With Special Needs

Published on: April 30, 2025 | By David W. Miller

How to Use a Trust to Care for a Loved One With Special Needs

Leaving money outright to a loved one with a disability can backfire. Supplemental Security Income (SSI) and Medicaid impose strict asset caps—usually $2,000. Exceed that limit, and benefits vanish until funds deplete. A carefully drafted special needs trust (SNT) provides extra resources while preserving public assistance. Consult an Austin estate planning and probate lawyer at McCulloch & Miller, PLLC to structure the trust correctly.

Why Standard Inheritances May Hurt Benefit Eligibility

SSI and Medicaid count cash, investment accounts, and even modest savings as resources. A direct inheritance pushes the beneficiary over the threshold, forcing them to spend down funds on basic needs those programs once covered. An SNT owns the assets instead, so they do not count toward eligibility. Because Texas participates in Medicaid estate recovery, bypassing the beneficiary’s name on the title also prevents the state from later demanding reimbursement.

Key Features of a Third-Party Special Needs Trust

A third-party SNT uses someone else’s money—typically parents or grandparents—to support the beneficiary. Major provisions include:

A discretionary distribution standard allowing payments for education, therapies, travel, and entertainment.
A prohibition on disbursing cash directly to the beneficiary, which could count as income.
Remainder beneficiaries who inherit unused funds when the primary beneficiary dies, avoiding Medicaid payback.

Texas law lets you appoint a “trust protector” who can replace an underperforming trustee or tweak administrative language without going back to court—an extra layer of security families appreciate.

What is a Special Needs Trust?

Published on: January 31, 2024 | By McCulloch & Miller, PLLC

The diversity of estate planning tools available for Texans is vast, and without guidance, it can be difficult to figure out which tool works best for your individualized needs and goals. One specific tool that might be useful for you or a loved one is called the special needs trust. In today’s blog, we review the special needs trust – its advantages, its implications, and important tips to keep in mind if you are thinking about pursuing this trust for someone in your life.

The special needs trust is an irrevocable trust that benefits a physically or mentally disabled individual. The money put in this kind of trust is untouchable to creditors and lenders, and it is managed by a trustee who controls the trust’s assets. Under the law in Texas, the trustee cannot give the trust’s beneficiary money directly from the trust, but he or she can instead use the money to cover the beneficiary’s education, medical needs, and services that might be needed to help the beneficiary navigate his or her disability.

One important advantage of the special needs trust is that the money in the trust does not contribute to the beneficiary’s income for purposes of Social Security Income (SSI). If a disabled person wants to receive these benefits, he or she cannot have more than $2,000 to his or her name. With the special needs trust, however, the amount of money held in the trust has no bearing on this $2,000 maximum. The trust therefore allows these beneficiaries to both receive SSI and, at the same time, keep money in the special needs trust.

Who Can Benefit from a Texas Special Needs Trust?

Published on: April 30, 2023 | By McCulloch & Miller, PLLC

As we have discussed previously in our blog, trusts can be powerful tools to protect and distribute assets for individuals in a variety of circumstances. One particular kind of trust is called the special needs trust, which is designed specifically for individuals with a disability. This type of trust distributes assets without eliminating its beneficiaries from public benefits, allowing them to receive the care they need while also maintaining a high quality of life even with their disability.

What Are the Kinds of Special Needs Trusts?

First, there is a “first-party trust,” which forms when a trust beneficiary receives some kind of asset, whether it be in the form of money, property, or stock. Normally, when a person’s assets rise to a certain level, that person is disqualified from public benefits that could help provide care for their disability. By using the first-party trust, however, the individual can put the funds into a trust and still receive public benefits. The downside of a first-party trust is that when the beneficiary dies, the state Medicaid agency gets whatever funds are left over at the time of death.

A second kind of special needs trust, the “third-party trust,” forms when someone wants to give a person with a disability a gift or inheritance. The funds in the third-party trust don’t actually belong to the individual with the disability – they are only being used for that person’s benefit. One important upside to the third-party trust is that the government does not end up taking the remainder of the funds when the beneficiary dies, since the funds never belonged to the beneficiary in the first place.

Texas Estate Planning for Families with Special Needs Children

Published on: December 28, 2021 | By McCulloch & Miller, PLLC

Because every family and their situation is unique, no two estate plans are the same. When families begin to create their estate plan with the help of an attorney, they will take their situation and family dynamics into account when deciding what to include in the plan. So for families with a special needs child, there are extra factors that should be considered in the formation of an estate plan. It can often be difficult for parents to think about the future—when they will not be around to take care of their child—but by creating an estate plan and taking some of the below recommendations, the special needs child’s future will be better secured.

How Does Having a Special Needs Child Impact Estate Planning?

One of the primary purposes of estate planning is to ensure loved ones are taken care of after a person passes away. Therefore, people will often give their financial assets and property to loved ones so they can use them in the future.

What is the Difference Between First- and Third-Party Texas Special Needs Trusts?

Published on: February 11, 2021 | By McCulloch & Miller, PLLC

For individuals with a special needs loved one, creating a Houston special needs trust can drastically improve their lives. Special needs trusts allow individuals to still receive government disability benefits while simultaneously receiving property and assets. However, there are two different types of special needs trust: first-party and third-party trusts. While these special needs trusts have many similarities, there are critical differences between the types of trusts. Because of this, knowing the differences between a first- and third-party trust is critical before people decide which trust is right for them and their loved one.

Third-Party Special Needs Trusts

The major distinction between first- and third-party special needs trusts is who is funding the trust. Simply put, a third-party trust is funded by family members, whereas first-party trusts are funded by the individual with special needs.

Houston Estate Planning for Children with Special Needs

Published on: October 8, 2020 | By McCulloch & Miller, PLLC

Estate planning is critical for people of all ages and especially important for people with varying life circumstances. For instance, families who have children with special needs should think about developing an estate plan and putting specific provisions in place for their children. One such measure parents should take is creating a Houston special needs trust for their children. This protects any potential public benefits the child may receive in the future while still allowing families to indirectly assist their special needs loved one with fulfilling their basic needs.

What is a Special Needs Trust?

A Special or Supplemental Needs Trust is created to hold the property of a special needs person and distribute the funds to them in a way that still preserves their eligibility for public benefits. Many government programs, such as Supplemental Security Income (SSI) benefits and Medicaid, offer benefits to special needs individuals; however, to qualify for these programs, an individual cannot own more than $2,000 in assets. However, many family members want to give their loved one assistance without disqualifying them for these benefits. Without a special needs trust in place, giving gifts or assets directly to another person will likely result in losing any public benefits.

The Importance of a Letter of Intent in a Houston Special Needs Plan

Published on: August 14, 2020 | By McCulloch & Miller, PLLC

Parents know their children better than anyone else. While this stands true for any parent-child relationship, it is especially applicable in families who have a child with special needs. Given the challenges that many children with disabilities face, parents may have valid concerns about what will happen to a child with special needs once they are gone. Creating a Houston special needs plan is an important step in the estate planning process that parents can take to provide themselves peace of mind, as well as provide their child with the support they need to live a long, fulfilling life.

One crucial element of a Houston special needs plan is the letter of intent. A letter of intent is simply a letter, drafted by parents, that includes vital information about their child to future caregivers. Unfortunately, letters of intent are often overlooked by parents who intend on having another family member take over the care giving role once they are gone. However, even if relatives are close with a child, they may not know all of the necessary information that a parent would hope to pass on. Further, in the event a familial caregiver passes away or becomes incapacitated themselves, vital information about the child would be lost. Thus, even if a family member is planning on assuming the caregiver’s role, a letter of intent is still important.

Letter of Intent Checklist Items:

Making Special Needs Planning Easy with the Texas ABLE Program

Published on: August 12, 2020 | By McCulloch & Miller, PLLC

Texas ABLE Program

Having someone in your life or family who has a disability can often mean disability-related expenses. For some, it can also mean needing additional assistance in order to maintain the individual and family’s personal and collective health, independence, and quality of life. The Texas Achieving a Better Life Experience (Texas ABLE) Program exists in order to encourage and support individuals with disabilities and their families. The program helps individuals with special needs save money that can be used to pay for disability-related expenses. The program is established and maintained by the Texas Prepaid Higher Education Tuition Board with support from the Texas Comptroller of Public Accounts.

To be eligible to receive assistance through the program, an individual must be a Texas resident who developed their qualifying disability before the age of 26. Texas ABLE’s website also includes an Eligibility Wizard, which is an easy online tool that can determine your eligibility to open an account with the program. To open an account, the individual must be 18 years of age and manage their own account. If the eligible individual is under the age of 18 or is unable to exercise signature authority over their account, they will need an Authorized Legal Representative who will help with opening and managing of the account. This individual can be a parent, legal guardian, or a trustee or agent acting under power of attorney.