A special needs trust (SNT) is designed to control the distribution of assets so that if there is a beneficiary who is disabled and is eligible for financial aid or services from the government, the money going to that beneficiary automatically goes to a SNT so as not to disqualify that beneficiary from receiving public benefits.

What is Defined as Special Needs?

Someone who needs a special needs trust is usually a person who is disabled and is eligible for financial aid or services from the government, but it can also be someone whom the settlor of the trust wants to protect with a special needs trust because they may not have the capacity to make reasonable decisions all the time and they may become dependent on public benefits in the future.

What are the Benefits of Special Needs Trusts?

The trustee of the special needs trust (SNT) may distribute the assets held by the trust at his or her discretion but is not required to make distributions. This means that creditors such as Medicaid or any others cannot require the trustee to make a distribution. The trust funds will not be a countable asset for purposes of government benefits. Unlike other trusts, the SNT Beneficiary will:

(1) have no power to assign, direct, distribute, or authorize distributions from such SNT Beneficiary’s trust;

(2) not be permitted to serve or elect to serve as sole Trustee or as a Co-Trustee of such SNT Beneficiary’s trust;

(3) have no power to remove any Trustee of such SNT Beneficiary’s trust;

(4) have no power to appoint a successor Trustee for such SNT Beneficiary’s trust or any other trust created hereunder; and

(5) have no power of appointment, whether limited or general, over the property of such SNT Beneficiary’s trust.

The lack of control by a SNT Beneficiary is what gives this trust its power to avoid any attacks from the outside to try to take this money, including voluntary or involuntary creditors.
The creation of the SNT trust usually includes language such as, “Any provision herein that is found or construed to lead to the SNT Beneficiary’s disqualification for public benefits will be deemed void or will be construed in such a manner as to allow such qualification.”

What is the Process to Create a Special Needs Trust?

A special needs trust can be incorporated into a will as a testamentary trust or in a revocable living trust as a means for distribution to a beneficiary. It can also be set up as a stand-alone trust if funding is readily available and the settlor is willing to make the contribution to the trust while still living.

Does the Type Of Disability or Special Needs Your Child Has Affect How You Structure the Trust?

Our trusts generally contain a fail-safe provision that says if a beneficiary is disabled and is eligible for financial aid or services from the government, then this type of trust will be formed for that distribution. We cannot know who might be in the position of needing a special needs trust in the future. For example, someone who is in a car accident may become reliant upon public benefits. But if you already know that a particular person will be relying on public benefits, then their distribution is specifically directed to a special needs trust.

For more information on Special Needs Trusts in Texas, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (512) 288-3200 today.