Special Needs Trust

The key component of an estate plan for an individual or a couple who want to provide for a family member with a disability is a Special Needs Trust (also called a Supplemental Needs Trust). Usually, the Special Needs Trust is set up to receive funds from a life insurance policy or a Will at the death of a parent or grandparent. The Special Needs Trust contains specific provisions that protect assets in the trust from being counted as a resource available for the support of the individual with the disability (referred to as the “beneficiary”), thereby allowing the beneficiary to qualify for Supplemental Security Income (SSI), Medicaid, Medicaid Waiver programs such as HCS, CLASS, Texas Home Living, and other government programs that are based on financial need. A family’s resources can quickly be depleted when caring for an individual with a disability who may have many medical needs, and for whom it may be difficult or impossible to find sufficient medical insurance. For most families it is crucial for the beneficiary to become eligible and maintain eligibility for SSI, Medicaid, and Medicaid Waiver and similar programs. Such programs provide funds for basic support needs, in addition to the medical coverage, and may also provide services such as case management, therapies and support services, residential facilities, day programs, job training and job support. Typically the funds in the Special Needs Trust can be spent on life enhancing goods and services, such as recreational and leisure activities, supplies and equipment for a hobby, cable TV, stereo equipment, movies, books, magazine subscriptions, dental treatment, equipment and therapies not covered by Medicaid, vacations, holiday celebrations, telephone and internet access and more. The trust document would instruct the trustee where to distribute funds once the beneficiary dies. Usually the remaining funds are distributed to other family members. In most circumstances, the trust will not be funded until one or both parents are deceased. The trust then receives assets from the parent or parents’ estates, or through life insurance policies or employee benefits beneficiary designations. Choosing a trustee requires careful consideration. A trustee must invest the funds in a reasonable and prudent manner, based on the amount in the trust, the current and anticipated needs of the beneficiary, and the life expectancy of the beneficiary. The trustee must keep current on changing Medicaid laws in order to not inadvertently disqualify the beneficiary from the much needed supports and services. It is often advisable to name a trust company as trustee, to eliminate any conflict of interest in family members who may serve as trustee and also be the remainder beneficiaries. A good balance is to have a trust company serve as trustee, but name family members as trust protectors, who will have the right of access to trust accountings and trust records at any time, and can have the authority to hire and fire trust companies. A non-profit pooled trust, such as The ARC of Texas Master Pooled Trust is also an option. With the non-profit pooled trust the family can get the benefits of the professional trust company, but at reduced fees. A trustee must keep an accounting, and needs to report to the guardian or the beneficiary, or anyone else specifically named in the trust, at least once a year.

Lisa Wilson is an attorney in private practice in Houston, Texas. She has been practicing law for 13 years. Her practice focuses on Estate Planning, Probate, and Guardianship, with a special emphasis on special needs planning. She is a graduate of the University of Texas at Austin, and of the University of Houston Law Center. She is also the parent of a 21-year old daughter with Down Syndrome.

This information is not intended to be legal advice, and does not establish an attorney-client relationship. The information contained herein is subject to change and anyone seeking to establish a special needs trust should seek the advice of a qualified, experienced attorney.