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.

The Two Types of Special Needs Trusts in Texas

Published on: November 15, 2022 | By David W. Miller

Loved ones, family members, and parents of special needs individuals know they often need a unique approach in helping care for the special needs child or adult in their life. This approach is often augmented by help from government benefits established to make life easier for people with special needs, such as Medicaid and Social Security. These programs, however, become unavailable to individuals above certain asset thresholds.

To help preserve access to this much-needed medical and living expense coverage granted by the federal government, caretakers and financial providers for special needs individuals may wish to set up special needs trusts. In a special needs trust, a grantor names a trustee to administer the trust and a beneficiary, who is the special needs individual. Funds are distributed from the trust without impacting income eligibility for these government programs. Special needs trusts must not be used for living expenses or medical expenses already covered by Medicaid or Social Security, but can be used for supplemental expenses, such as job training or educational program tuition, and even luxury expenses and non-essential costs like vacations, hobbies, or home furnishings. The beneficiary never has direct access to the trust.

There are two main types of special needs trusts: first-party and third-party. The following summarizes the key differences between the two types of trusts. An estate planning attorney can help determine which type, if any, of these two trusts makes the most sense for your family.

Planning for Retirement with a Special Needs Child

Published on: October 12, 2022 | By Thomas W. McCulloch

Planning for retirement can already seem intimidating: it can be seen as time-consuming, stressful, and expensive. For parents of special needs children or adults within their care, retirement planning may seem impossible.

Retirement planning usually involves analyzing income, expected income, and assets and planning those inflows against expected outflows, or expenses, from retirement to the end of life. But parents of children with special needs may need to ensure their children are cared for even beyond their lives, necessitating a multi-generational time horizon in planning. In addition, one or both parents may make career and lifestyle changes to care for their children themselves, which can impact the cash coming in to fund retirement. If a caretaker passes on, extra expenses or decreased income to the surviving parent may result from hiring full-time care or taking on those roles. Finally, costs can be higher for special needs children and may increase as these children become adults. Insurance premiums, and the costs of health and medical care, caretaking, special programs, rehabilitation and therapy, and adaptive or assistive equipment may all need to be factored into the equation.

A skilled estate planning attorney can make this daunting process more navigable. One tool estate planning attorneys can use is to help their clients set up special needs trusts to protect their children’s government benefits while also giving them a stream of additional income.

Special Needs Trusts

Special needs trusts work like any other trust: a grantor establishes a trust to help the beneficiary receive property and assets and names a trustee to administer the trust. Special needs trusts allow an individual to receive funds without impacting their income eligibility for much-needed special needs benefits from the government, such as Medicaid or Social Security. These programs help fund direct medical and living expenses. Special needs trusts, in contrast, cannot be used for living expenses or anything covered by government programs, but can be used for supplemental expenses such as job training or tuition or non-essential costs like furniture, personal services, or hobbies.

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.

Adding a Special Needs Trust to Your Houston Estate Plan

Published on: July 6, 2020 | By McCulloch & Miller, PLLC

For families with children, creating a comprehensive Houston estate plan is critically important. The need for such planning is even more important for those with children who have special needs. As with all parents, proper planning is the only way to ensure that children will be properly cared for if their parents pass away prematurely. However, children with special needs may have very specific needs that must be met. If these needs are not addressed in their parents’ estate plan, they are less likely to be cared for should one or both parents pass away. Furthermore, based on the severity of the child’s disability, parents may need to plan for ways to meet such needs long into adulthood.

One of the most common estate planning tools for parents with special needs children are trusts. A trust is an arrangement where property is placed under the ownership and care of a trustee for the benefit of one or more beneficiaries. It is almost always a good idea for parents of a special needs child to provide for the creation of a trust naming that child as a beneficiary. However, the creation of a trust is not the only thing for parents to consider. Here are a few estate-planning considerations for parents interested in creating a trust for their child with special needs.

Choosing the Right Type of Trust

Basics of a Special Needs Trust

Published on: July 18, 2019 | By McCulloch & Miller, PLLC

Parents of special needs children need to be especially proactive about planning for the future. Their planning should start with an estate plan, that includes a Special Needs Trust.

It’s one of the hardest things for any parent to think about, but for special needs families, planning for the child’s needs when the parents have passed, is particularly important. Trying to determine how much money the child will need while the parents are living and after they have died is complicated.

A recent Kiplinger’s article asks “How Much Should Go into Your Special Needs Trust?” As the article explains, a special needs trust, when properly established and managed, lets someone with a disability continue getting certain public benefits.

Special Needs Planning and ABLE Accounts

Published on: May 24, 2019 | By McCulloch & Miller, PLLC

How the “Achieving a Better Life Experience” Act, known as ABLE, provides a mechanism to create a tax-advantaged savings tool for individuals with disabilities and their families.

The benefits for income, health care, food and housing for disabled Americans are awarded based on a resource test, so that individuals who seek benefits are typically limited to have no more than $2,000 in savings or assets. This includes eligibility for Supplemental Security Income (SSI), SNAP and Medicaid.

In 2014, Congress passed legislation allowing people with disabilities to establish an account, similar to a special needs trust and with some similarities to a 529 college savings account, to accumulate funds to pay for qualified disability expenses. The legislation was named the Achieving a Better Life Experience Act (ABLE).

Special Needs Planning With Special Needs Trusts

Published on: April 11, 2019 | By McCulloch & Miller, PLLC

It is important to understand the basics of special needs planning, so that you can plan for your child’s future. There are many issues to address, but an experienced Houston estate planning professional will be able to help.

Special needs planning is challenging. It’s important to have a strong team to work with. An estate planning attorney with experience in helping special needs families will be able to guide you through the process. They will also likely have access to other professionals to help.

A recent Forbes article, “Special Needs Kids Require Specialized Estate Planning,” says that if you have a child with special needs, it’s critical that you look at your planning options with your estate planning attorney and discuss your child’s health, capabilities and prognosis. You can then customize a plan that works for your child, with as much flexibility as possible.