Providing for a loved one with a disability calls for more care than ordinary estate planning. A gift made with the best of intentions can unintentionally disqualify that person from essential government benefits. With the right tools, you can give meaningful support and protect those benefits at the same time. Ellen Williamson Law explains below how special needs planning works for Texas families.
Why Standard Planning Can Backfire
Many public benefits, including Supplemental Security Income and Medicaid, are needs-based. Eligibility depends partly on how few resources a person owns. If a person with a disability receives an inheritance, a gift, or a life insurance payout directly, those funds can push them over the resource limit and interrupt the benefits they rely on for healthcare, housing, and daily living.
That is why naming a person with a disability directly in a will or on a beneficiary designation is often a serious mistake. The solution is not to leave them out. It is to direct support through the right structure.
Special Needs Trusts
A special needs trust, sometimes called a supplemental needs trust, is the central tool in this kind of planning. Instead of giving assets to the person directly, the assets are held in a trust managed by a trustee for that person’s benefit. Because the beneficiary does not own or control the trust assets, the funds generally do not count against benefit eligibility.
A properly drafted special needs trust can pay for goods and services that improve quality of life, supplementing rather than replacing public benefits. The drafting must be precise, however, because small errors can defeat the purpose of the trust.
Third-Party and First-Party Trusts
There are different kinds of special needs trusts. A third-party special needs trust is funded with assets that belong to someone other than the beneficiary, typically a parent or grandparent planning ahead. A first-party special needs trust is funded with assets that already belong to the person with a disability, such as a personal injury settlement or an inheritance received directly.
The two types follow different rules, including different requirements about what happens to any funds remaining when the trust ends. Choosing and drafting the correct type is a decision best made with attorney guidance.
ABLE Accounts
Texas families have another valuable option. An ABLE account is a tax-advantaged savings account that allows a person with a qualifying disability to save money without losing certain benefits, within annual and total limits set by law. The state-sponsored Texas ABLE program lets eligible Texans and their families save for disability-related expenses.
ABLE accounts and special needs trusts are not competitors. Many families use both, with an ABLE account handling everyday and modest savings needs and a special needs trust holding larger amounts. The right combination depends on the family’s circumstances.
The Letter of Intent
A letter of intent is not a legal document, but it is one of the most valuable things a caregiver can create. It records the things only the family knows: the person’s routines, preferences, medical history, providers, fears, comforts, and goals. It guides future caregivers and trustees in honoring not just the person’s needs but their personality and wishes. Keeping it updated over time makes it even more useful.
Coordinating the Whole Plan
Special needs planning works best when every piece points in the same direction. Wills, trusts, and beneficiary designations should all route support through the special needs trust rather than to the individual. Families should also think carefully about who will serve as trustee, applying the same care described in our overview of choosing an executor or trustee.
If the person with a disability is an adult who cannot manage their own affairs, the family may also need to consider guardianship or a less restrictive alternative. Our overview of guardianship in Texas explains how that process works. Because circumstances and laws change, families should revisit the plan periodically, as described in our overview of updating your estate plan.
Get Help from a Texas Estate Planning Attorney
Ellen Williamson Law helps Texas families plan thoughtfully for loved ones with disabilities, with special needs trusts and supporting documents tailored to each family’s situation. Our firm works with clients through our Dallas trust attorney and Dallas estate planning attorney services, as well as our Dallas guardianship attorney page. We offer flat-fee billing for most planning matters, so the cost is clear before any work begins.
To build a plan that protects your loved one’s benefits and future, contact Ellen Williamson Law to schedule a consultation.