Caring for a child with special needs requires dedication, careful planning, and significant resources. However, when you have a child with special needs, you may worry about affording the care they need or providing for them in their later years. A special needs trust can offer several critical benefits to your family to help you provide your child with the support they need for their special needs.
What Is a Special Needs Trust?
A special needs trust is a specific type of trust that can hold assets for an individual with special needs, ensuring they continue to qualify for government benefits, such as Medicaid, that provide them with care and support for their condition. Special needs trusts can also provide individuals with severe disabilities with financial support to cover expenses beyond those covered by government programs that can improve their quality of life.
The Importance of Special Needs Trusts
Texas’s Medicaid program imposes strict financial eligibility requirements on beneficiaries. People who receive Medicaid cannot earn above a monthly income and must own no or few assets with a total value below a specific threshold. However, some children with special needs may receive substantial assets during their childhood, such as a medical malpractice settlement for a birth injury or a personal injury award for disabling accident injuries. These assets can disqualify children with special needs from receiving the Medicaid benefits they need to pay for care and support for their conditions.
Types of Special Needs Trusts
Special needs trusts come in three main types: first-party, third-party, and pooled. A first-party special needs trust is a trust funded by assets belonging to the individual with special needs, such as a personal injury settlement. Assets remaining in a first-party trust after the individual’s passing must reimburse Medicaid for benefits paid during the individual’s life.
A third-party special needs trust is funded by assets contributed by other individuals, such as a disabled child’s parents, grandparents, and other family members.
Pooled special needs trusts are trusts managed by qualified non-profit organizations. The trust holds assets on behalf of multiple individuals with special needs, with each individual having a separate subaccount within the trust. Pooled trusts may work better for individuals with special needs who have few assets to place in a trust, as trust members share the trust administration expenses.
What Can the Trust Pay For?
Special needs trusts, in addition to ensuring access to Medicaid, can also provide children with special needs with financial resources to pay for expenses not covered by government benefits. These expenses can help improve a child’s quality of life. Examples of expenses that a special needs trust can pay for include:
- Therapy services not covered by Medicaid
- Special education services
- Assistive technology
- Recreational and extracurricular activities
- Personal care items
A child’s special needs trust cannot contribute to household or food expenses for their family’s home without potentially jeopardizing the child’s eligibility for government benefits.
Setting Up a Special Needs Trust
Families who wish to create special needs trusts for their children with special needs should seek experienced legal assistance to ensure that a trust does not affect the child’s benefits or financial interests. A lawyer can help select a trustee, fund the trust, and coordinate it with the family’s estate plan.
Contact a Disability Planning Lawyer Today
As a parent with a child with special needs, you may worry about ensuring they have care and support throughout their life, even when you can no longer take care of them years down the road. A special needs trust can help you protect their financial interests and welfare. Contact Guest & Gray today for a free consultation with a Forney estate planning attorney to learn how special needs trusts work in Texas and how they can help your family provide your child with special needs with the care and support they need.
