Special Needs Estate Planning
Serving Clients in Houston and the Surrounding Area
Special Needs Estate Planning
Planning for the future of a child or loved one with special needs requires a unique approach. The stakes are high: a single mistake in an estate plan can inadvertently disqualify your loved one from the government benefits they depend on — benefits like Supplemental Security Income (SSI) and Medicaid that provide essential income, health care, and support services.
At The Stegall Law Firm, we help families in Houston and the surrounding area develop comprehensive estate plans that protect their loved ones with special needs. Our goal is to coordinate the legal, financial, and care-planning aspects of your family’s situation so that your loved one can maintain their quality of life — both now and after you are no longer able to provide care yourself.
Special needs estate planning addresses questions that every family in this situation must confront:
- Who will care for your loved one when you are gone?
- How will their care be funded without jeopardizing their eligibility for government benefits?
- What legal structures need to be in place to protect their interests?
- How do you ensure that your other children or family members are also provided for?
Support Trusts
A support trust is a type of trust that directs the trustee to use trust funds for the beneficiary’s health, education, maintenance, and support. While support trusts are common in general estate planning, they are not appropriate for a beneficiary who receives — or may in the future receive — means-tested government benefits such as SSI or Medicaid.
The reason is straightforward: government agencies count the assets in a support trust as available resources for the beneficiary. If the trust assets exceed the program’s resource limit (typically $2,000 for SSI), the beneficiary will be disqualified from benefits.
This is why families with special needs loved ones must use a different type of trust — a special needs trust — to protect their loved one’s eligibility for government programs while still supplementing their quality of life.
Special Needs Trusts
A special needs trust (also called a supplemental needs trust) is specifically designed to hold assets for the benefit of a person with a disability without disqualifying them from SSI, Medicaid, or other means-tested government benefits. The trust is drafted so that the funds supplement — but do not replace — the benefits the person receives from government programs.
Trust funds can be used to pay for a wide range of goods and services that improve the beneficiary’s quality of life, including:
- Personal care attendants and companion services
- Vacations and recreational activities
- Electronic equipment, computers, and assistive technology
- Education and training beyond what is publicly funded
- Transportation, including a vehicle
- Clothing and personal items
- Home furnishings and modifications
There are two primary types of special needs trusts:
Third-Party Special Needs Trusts
A third-party special needs trust is funded with assets that belong to someone other than the beneficiary — typically parents, grandparents, or other family members. These trusts are usually established as part of the family’s estate plan and funded through gifts, bequests, or life insurance proceeds.
Key features of third-party special needs trusts:
- No payback requirement. When the beneficiary passes away, the remaining trust assets can pass to other family members or beneficiaries designated in the trust. There is no requirement to reimburse the state for Medicaid benefits that were provided during the beneficiary’s lifetime.
- Flexibility in design. The trust can be structured to reflect the family’s wishes and the beneficiary’s specific needs.
- Can be established at any time. The trust can be created during the grantor’s lifetime (a living trust) or through the grantor’s will (a testamentary trust).
Self-Settled Special Needs Trusts
A self-settled special needs trust (also called a first-party special needs trust or a d(4)(A) trust) is funded with assets that belong to the beneficiary themselves. This type of trust is commonly used when a person with a disability receives a personal injury settlement, an inheritance paid directly to them, or other funds that would otherwise disqualify them from government benefits.
Key features of self-settled special needs trusts:
- Payback requirement. Upon the death of the beneficiary, any funds remaining in the trust must first be used to reimburse the state for Medicaid benefits provided during the beneficiary’s lifetime. Only after the state has been repaid can remaining assets be distributed to other beneficiaries.
- Age limitation. The trust must be established before the beneficiary reaches age 65.
- Must be established by a parent, grandparent, legal guardian, or court. The beneficiary cannot establish the trust themselves.
Choosing the right type of special needs trust — and drafting it correctly — is essential. An improperly drafted trust can fail to protect the beneficiary’s government benefits, defeating its entire purpose.
Special Needs Estate Planning Online Resource Center
The following organizations and resources provide valuable information for families navigating special needs planning:
Government Resources
- Social Security Administration — Benefits for People with Disabilities — Information about SSI, SSDI, and other Social Security programs for individuals with disabilities.
- A Handbook for Trustees of Special Needs Trusts — A practical guide for individuals serving as trustees of special needs trusts.
Advocacy and Support Organizations
- eParent.com — A resource for parents of children with disabilities, offering articles, guides, and community support.
- The Arc — The largest national community-based organization advocating for and with people with intellectual and developmental disabilities and their families.
- National Academy of Elder Law Attorneys (NAELA) — A professional association of attorneys who specialize in elder law and special needs planning. Their website includes a directory to help families find qualified attorneys.
- National Alliance on Mental Illness (NAMI) — The nation’s largest grassroots mental health organization dedicated to improving the lives of individuals and families affected by mental illness.
- Center for Parent Information and Resources — A central hub of information and resources for families of children with disabilities, connecting families to Parent Centers in every state.
Research and Data
- Annual Disability Statistics Compendium — A comprehensive collection of disability-related statistics from federal and other sources, covering employment, health, education, and community living.
Calculating Your Loved One’s Future Financial Needs
One of the most important steps in special needs estate planning is estimating the lifetime cost of care for your loved one. This calculation helps determine how much funding a special needs trust will need to provide meaningful supplemental support over the beneficiary’s lifetime.
Factors to consider when calculating future financial needs include:
- Life expectancy. Advances in medical care have significantly increased life expectancy for many individuals with disabilities. Your plan should account for a full lifetime of support.
- Current and anticipated care needs. Consider the level of care your loved one currently requires and how those needs may change over time. Will they need residential care, day programs, personal care attendants, or specialized therapies?
- Cost of living increases. The cost of care, housing, transportation, and other essentials will continue to rise over time. Your calculations should factor in inflation.
- Government benefits. Estimate the value of the government benefits your loved one currently receives and is expected to receive. The special needs trust is designed to supplement — not replace — these benefits.
- Income sources. Identify all potential sources of income, including employment (if applicable), ABLE accounts, life insurance proceeds, and contributions from family members.
- Quality of life enhancements. Beyond basic needs, consider the cost of activities, experiences, and items that will enhance your loved one’s quality of life — vacations, hobbies, social activities, technology, and more.
Working with an elder law attorney and a financial planner who specialize in special needs planning can help you develop a realistic and comprehensive financial plan.
Take the Next Step
Every family’s situation is unique, and there is no one-size-fits-all approach to special needs estate planning. At The Stegall Law Firm, we take the time to understand your family’s specific circumstances, your loved one’s needs, and your goals for the future. We then develop a plan that coordinates all of the legal, financial, and care-planning elements into a cohesive strategy.
Contact us today to schedule a consultation and begin planning for your loved one’s future.