Typical trusts are fairly simple to understand. They involve three parties: a trustor, trustee, and beneficiary. The trustor owns the assets and sets up the trust. They delegate managing the trust’s assets to the trustee, who manages them in the beneficiary’s interest.
Ordinary trusts are a popular estate planning tool, as they’re great at managing complex family dynamics and many assets. However, there are certain things common trusts can’t do, such as care for special needs children. A typical trust will work as mentioned above for a special needs child, but it may force the child to forgo public assistance, such as Medicaid.
Due to the unique requirements of special needs children, there are different trusts available for them. These are called special (or supplemental) needs trusts (SNTs), and they don’t compromise the child’s access to public assistance. Here’s what you need to know about special needs trusts in Texas.
To retain access to government benefits, a person needs to own less than $2,000 worth of assets. An SNT limits the rights of the beneficiary so that their eligibility for public assistance is preserved.
After your child passes, the government has a claim over the funds left in the trust. Said funds essentially compensate the government for the assistance they give your child over their lifetime. The remaining funds are disbursed to successor beneficiaries. However, there’s rarely anything left in the fund after the state is compensated.
Ordinary Trust vs. Special Needs Trust
An SNT’s trustee will expend the trust’s funds to supplement the special needs beneficiary’s public assistance and preserve their access to it. An ordinary trust’s disbursements will count towards the $2,000 limit.
Trustees and Beneficiaries
Generally, a beneficiary can’t exercise any control over an SNT. The beneficiary doesn’t have control over the assets, nor can they manage them. Additionally, they can’t demand funds from the SNT. Lastly, the child can’t be the fund’s trustee. The fund is only used to supplement government assistance.
The trustee can spend the funds to improve the child’s quality of life. For instance, they can spend on entertainment, electronics, therapy, vacations, etc. Additionally, they can also spend the funds to fill gaps in government assistance programs.
If you’re attempting to set up an SNT, get in touch with us at Mike Massey Law. We provide trust, probate, and estate planning attorneys in Travis, Harris County, Houston, and Austin.