Parents of a child with special needs who live in Texas soon learn that such a child is eligible for many governmental benefits. They also learn that careful financial planning will be necessary to maximize the amount of such benefits that may be available to their child. Many special needs children do not possess assets of any substantial value, and they are unlikely ever to lose their eligibility for government programs. On the other hand, children who own substantial assets in their own name can inadvertently sacrifice their eligibility for programs that could provide substantial financial assistance. Over the last few years, the Texas estate planning bar has devised a legal device that can preserve privately owned assets while still maintaining eligibility for important financial assistance programs.
What is a special needs trust?
The planning device is called a “special needs trust.” In its simplest form, a Special Needs Trust is set up to take ownership of assets belonging to the disabled person and to use those assets exclusively for the welfare of the special needs person. The trust document must spell out the allowable purposes for spending the trust assets and must at the same time comply with state and federal regulations that govern the form and operation of special needs trust. A SNT that is properly established can provide financial assistance for the special needs person without incurring unnecessary income tax liability. Also, the beneficiary of the special needs trust cannot have any control over the management of the trust assets.
Managing a special needs trust
The person who establishes the special needs trust (called the “settlor”) must choose a person (called the “trustee”) to manage the trust in accordance with the trust document. The trustee can be an adult family member, close friend, or any other person in whom the settlor. Many banks and financial counselors also offer professional trustee services.
Setting up a Special Needs Trust
Anyone who is interested in establishing a Special Needs Trust should consult an experienced estate planning attorney. A capable estate planning lawyer can review the entire family situation and recommend the type of SNT that will be most beneficial under those circumstances. Professional legal assistance is also essential in drafting a trust instrument that will satisfy the formal legal requirements for such documents.