Protect Your Present. Plan For Your Future. Work With an Experienced Legal Professional SCHEDULE A FREE STRATEGY SESSION

The Benefits of a Special Needs Trust 

James P. Peterson Attorney at Law  Sept. 28, 2022

Special needs trust application with clipboard and notepad.If you have a child with special needs who is facing a mental or physical disability, your child will likely need the assistance of government programs to help in their care and development. To qualify for these programs – notably, Supplemental Security Income (SSI) and Medicaid – a disabled individual is subject to income and asset limitations.  

While the child may have no income or assets, the parents do, and if they contribute funds to the child, the Social Security Administration (SSA) will take that into account when considering SSI qualifications. The current limit on assets is $2,000 for an individual. Medicaid is administered by the states in a joint program with the federal government and has similar income/asset qualifications.  

There is a perfectly legal way to get around this income/asset limitation, however, through the establishment of a special needs trust (SNT). Assets in an SNT do not count toward any SSI or Medicaid threshold.   

If you have a special needs child in San Antonio, Texas, contact James P. Peterson Attorney at Law, to learn about establishing a special needs trust to help your child retain government benefit qualifications and have supplemental funds available for needs in life.  

James P. Peterson is a trusted attorney with more than three decades’ experience who proudly serves clients in San Antonio, Boerne, New Braunfels, and the outer reaches of Texas. 

Which Type of SNT Fits Your Situation? 

While SSI and Medicaid have firm limits on the amount of cash and assets a recipient may have, if those assets are held in a special needs trust, they will not count toward the financial threshold, provided they aren’t used for purposes provided by SSI and Medicaid – generally food, housing, and health care. SNTs must be used for supplementary purposes.  

There are three types of SNTS:  

THIRD-PARTY SNT: This type of special needs trust is generally established by the parents but can be established by anyone. Also, after it is established, anyone can contribute to a third-party SNT. Any type of asset – cash, property, investments, life insurance policies – can be contributed.    

Since the assets in the trust never belong to the beneficiary, when the beneficiary (disabled child) passes on, the remaining assets can be distributed to named beneficiaries. However, anything contributed after the beneficiary turns 65 is considered a “transfer of assets” and can be claimed by the federal government for repayment after the person’s death.  

SELF-SETTLED OR FIRST-PARTY SNT: If the disabled individual, for instance, receives a cash settlement or an inheritance, the funds can be placed in a first-party SNT, provided the disabled person is under 65 years of age. However, when the beneficiary dies, the funds will be reclaimed by the federal government to pay for services provided.  

POOLED SNT: This is a special needs trust run by an independent charitable third-party organization. A parent can contribute to the SNT with potentially lower establishment costs than a third-party SNT. The disabled person can also use a pooled trust for a self-settled SNT. The independent trustee administering the SNT, however, has sole authority as to whether and when to distribute funds when requested. 

Role of the Trustee in an SNT 

Like any trust instrument, a trustee must be named to administer the special needs trust. The named trustee can be a family member, close friend, or even a professional institution like a bank or investment firm. The trust has sole authority to disburse funds as requested by the beneficiary and must make sure that the funds do not go toward services already provided by Medicaid and SSI. 

Where and When Can SNT Funds Be Used 

SSI and Medicaid cover only the basics of care for the disabled person, and then not always to the fullest extent. Some medical expenses, such as certain therapies, equipment, and services, are not covered. These can be covered by the SNT. 

Other everyday living expenses are left up to the disabled person or their family to provide, including: 

  • Caregiving and personal assistance 

  • Housekeeping, cooking 

  • Computers, cell phones, television, appliances 

  • Grooming, dry cleaning, clothing 

  • Transportation costs 

  • Yard services, home security services 

  • Pet care 

  • Accountants’ and attorneys’ expenses 

The following, including other needs, can be expensed from the SNT when necessary. 

Look to Experienced Legal Help 

If you have a special needs child, a qualifying trust can shield them from jeopardy when it comes to qualifying for Medicaid and SSI services. In addition, the special needs trust can provide the assistance and comforts of life that federal programs cannot.   

Setting up a special needs trust, however, requires special attention to adhering to legal and funding standards, which cannot be guaranteed by simply downloading a form online and filling it out. You should definitely seek the assistance of an experienced trust attorney to establish a qualifying and enduring special needs trust.  

If you’re in San Antonio or neighboring areas of Texas, rely on the three decades of experience of James P. Peterson Attorney at Law. Reach out today. Let’s discuss your situation and create the best path forward to achieve peace of mind for all.