What is a Special Needs Trust in Texas?
May 20, 2024
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When you have a child or family member with special needs, caring for their immediate needs is always at the forefront of your mind. But preparing for their future should also be a top priority. Without a set plan in place, how will your child have the financial resources necessary to thrive throughout adulthood?
A key planning tool for families with special needs children is a Special Needs Trust (SNT), which is developed by creating a financial plan for your child’s future while also preserving their eligibility for vital governmental benefits and support programs.
If you have questions such as “What is a Special Needs Trust?” or “How does a Special Needs Trust work?” continue reading to explore the ins and outs of this type of trust in Texas.
You will learn about the different types of trusts available, the significant benefits they may provide to individuals with special needs and their loved ones, and how our Wealth Management Department can partner with you to design and implement strategies to help secure your child’s future.
What Is a Special Needs Trust?
A child with special needs depends on parents and loved ones to provide for their physical, emotional, medical, and financial needs. They may also rely on essential needs-based government benefits, such as Medicaid, to cover additional needs and services.
But, when parents and caregivers are no longer in the picture, a child with special needs may still need financial resources and government benefits for their full-time care and well-being. A Special Needs Trust is an invaluable resource for individuals with special needs and their families needing a long-term care solution.
An SNT, which you may also see defined as a Supplemental Needs Trust, is a legal arrangement that manages the financial assets of a person with special needs while preserving their eligibility for Medicaid or Supplemental Security Income (SSI).
An SNT may also be referred to as a Medicaid-Qualifying Trust since it is structured to be in compliance with Medicaid rules and regulations so eligibility for long-term benefits and services is not jeopardized.
SNTs are typically established and funded by a parent, grandparent, or legal guardian. Once created, the trust holds and manages trust funds, which can include cash, life insurance proceeds, real estate, and legal settlements. SNT funds may be used to cover supplemental costs and services not covered by Medicaid or SSI, such as:
- Medical expenses
- Transportation services
- Specialized vehicles
- Educational expenses
- Therapy and rehabilitation services
- Home modifications
- Professional care services
With a Special Needs Trust, your family can establish a legal plan that helps assure your child’s financial security for many years to come.
Establishing a Special Needs Trust
The process of creating an SNT begins with having an attorney in place to begin the legal documentation. The trust document details several key factors and decisions, including:
- Purpose of the trust
- How funds may or may not be used to support a special needs individual
- Specifications on how the trust can be funded
- How earned income from the trust will be managed
- List of all assets in the trust belonging to the beneficiary
- Identify the remainder beneficiaries who will inherit any remaining trust funds
In addition, an individual or entity will be appointed to serve as a trustee, who will be responsible for administering the funds and overseeing the trust property. The trustee has a fiduciary responsibility to act in the best interest of the beneficiary and ensure they always have access to the financial support needed for their future care.
There are three main types of SNTs to choose from:
- First Party Special Needs Trust: This trust holds assets already belonging to a person with special needs, such as a family inheritance or an accident settlement.
- Third Party SNT: This type of trust is often referred to as a family trust. It holds funds deposited by family members or guardians who want to provide for the future financial needs of a special needs individual.
- Court-Ordered Trust: A trust ordered by the court system that holds funds inherited or granted from a legal settlement or judgment issued by the court.
Our bank’s experienced Wealth Management team is able to work with your attorney to determine the best solution for your child’s future needs and provide long-term solutions for asset management.
In addition, our Wealth Management Department can serve as Executor or Co-executor for your client’s estate or assist when an impartial third party is needed to help settle or probate an estate.
Discover The Benefits of SNTs
A Special Needs Trust creates several advantages to support individuals with special needs who require a long-term solution for managing their finances. Some of these benefits may include:
- Preserving eligibility for government assistance like Medicaid and SSI
- Protecting trust funds from creditors
- Helping to ensure financial resources for long-term care
- Avoiding financial exploitation of an individual with special needs
- Providing positive tax implications for family members once the trust is established*
- Long-term peace of mind
The legal and financial protection gained from a special needs trust may help safeguard the future of your special needs child, which could enable them to have the resources needed to thrive for many years to come.
Texas Gulf Bank: A Dependable Partner for Managing Your SNT
Establishing a special needs trust is a vital step for protecting the future of your loved one with special needs. A Special Needs Trust provides financial security and resources, peace of mind, and a legal structure for managing assets while preserving eligibility for essential government programs and benefits.
If you’re a parent, guardian, or third-party individual interested in creating a special needs trust, Texas Gulf Bank is ready to help. The Wealth Management Department at Texas Gulf Bank offers extensive guidance and strategic financial solutions to families needing an SNT for a child or adult with a disability.
What sets Texas Gulf Bank apart from other banks is our ability to serve as a trustee to oversee trust property and securely administer funds belonging to trust beneficiaries. As a bank with trustee powers, we can collaborate with your estate planning attorneys and CPAs to develop a trust that meets your unique financial goals and long-term needs.
Contact the Wealth Management team at Texas Gulf Bank to schedule a consultation about our services. Feel free to ask us additional questions beyond “What is a Special Needs Trust?” We are ready to help you protect your loved one’s financial future.
*Consult your tax advisor about how a Special Needs Trust might benefit you, depending on your particular tax situation.