What You Should Know About a Special Needs Trust

 Posted on February 14, 2024 in Estate Planning

If you have a disabled family member who relies on needs-based government benefits like Medicaid or SSI, you may have heard about special needs trusts. But what exactly are they, and how can they help protect your loved one’s eligibility for public assistance programs? Knowing what to expect with a special needs trust and how it can provide value to your family is beneficial. A Texas lawyer can help you gain understanding and help you form this type of trust.

What is a Special Needs Trust?

A special needs trust, sometimes called a supplemental needs trust, is a legal instrument designed to hold and manage assets for a disabled beneficiary without affecting their eligibility for public benefits. The assets in the trust are used to pay for costs of living that government aid does not cover, such as specialized medical equipment, educational expenses, modifications to vehicles or housing, and more.

There are two main types of special needs trusts:

• Third-party special needs trusts are funded with assets belonging to someone other than the disabled beneficiary. Typically funded by parents, grandparents, or other family who want to provide supplemental support for their disabled loved one.
• First-party or “self-settled” special needs trusts are funded with assets belonging to the disabled beneficiary themselves, often proceeds from an injury settlement or inheritance.

How Do Special Needs Trusts Work?

A special needs trust is set up to benefit a disabled beneficiary, but the trust owns the assets rather than the individual. A trustee oversees and manages the funds and makes disbursements from the trust to meet the beneficiary’s supplemental needs.

Notably, the beneficiary does not have direct access or control over the money. This ensures that public benefits administrators do not count trust assets against them when determining their eligibility for government aid programs like Medicaid and SSI.

Why are Special Needs Trusts Useful?

Families often worry that leaving an inheritance directly to a disabled loved one may disqualify them from essential government benefits. Many disabled individuals rely on SSI as their sole source of income, and eligibility rules prohibit having more than $2,000 in countable personal assets. This is where special needs trusts come in. Money placed into a properly drafted trust can provide supplemental financial support while protecting ongoing benefit eligibility.

Contact a Fort Worth, TX Estate Planning Lawyer

Take the time to learn how special needs trusts work if you have a disabled family member who depends on needs-based government aid programs. A Fort Worth, TX estate planning attorney can review your situation and help ensure your loved one’s needs will be addressed. Call Gonzalez Law, PLLC at 817-349-7330 for a free consultation.