Special Needs Planning
Third Party Special Needs Trusts
Third Party Special Needs Trusts
Third Party Special Needs Trusts
A special needs trust (“SNT”), also called a Supplemental Needs Trust, is a trust set up to hold assets to benefit a person with special needs. A "Third Party" SNT is a trust established and funded by someone other than the individual with special needs, such as parents who wish to leave an inheritance to a child with special needs and is frequently used for Medicaid planning to assure a child can qualify for governmental needs-based programs such as Medicaid. If placed in an SNT, the funds are not considered available resources, and the child can receive needs-based benefits regardless of the size of the the parents' estate. The SNT is then used to pay for things that are not covered by the child’s benefits, such as uncovered medical equipment, in-home caregivers, rehabilitation, and other medical costs, as well as enriching activities such as entertainment, travel, camps, and classes.
First Party Special Needs Trusts
Third Party Special Needs Trusts
Third Party Special Needs Trusts
An individual with special needs who is under age 65 can also establish his or her own irrevocable special needs trust (SNT) which is funded with the disabled individual's resources. These types of special needs trusts are called First Party SNT's or (d)(4)(A) trusts and are frequently established for Medicaid planning when an individual with special needs receives a court settlement or an inheritance outright. Just as with a third person SNT, once funds are placed in a First Party SNT, the funds are no longer considered available for purposes of eligibility for needs-based governmental benefits such as Medicaid. However, when the individual dies, any remaining funds in the SNT must first be used to reimburse the state for any benefits paid during the person's lifetime. In Texas, if the individual is a minor or is legally incapacitated, the SNT can be established by a court under Section 1301 of the Texas Estates Code as an alternative to guardianship. This type of trust is sometimes called 1301 Management Trust. guardianships and guardianship alternatives
ABLE Accounts
Third Party Special Needs Trusts
ABLE Accounts
The Texas ABLE® Program encourages and assists individuals and families in saving funds for the purpose of supporting individuals with disabilities to maintain health, independence, and quality of life. Eligible individuals with disabilities can save up to $18,000 per year, not to exceed a lifetime maximum of $500,000, in a tax-advantaged account, and funds up to $100,000 are disregarded for purposes of determining eligibility to receive government benefits. Earnings accumulate on a tax-deferred basis, and qualified withdrawals are exempt from federal income tax if they are used to pay for Qualified Disability Expenses. To be eligible, an individual must have a disability prior to age 26 and either (i) receive SSI or SSDI, (ii) have a condition on the SSA list of Compassionate Allowances Conditions, or (3) have a written diagnosis from a physician that meets eligibility requirements.
Elder Law & Estate Planning
Medicaid and Long-Term Care
Medical and Financial Powers of Attorney
Medical and Financial Powers of Attorney
Medicaid planning in Texas is complicated. There are over 109 different Medicaid programs in the State of Texas, and eligibility is generally based on an individual’s age, disability, income and resources. For elderly clients, Medicaid for the Elderly and People with Disabilities (MEPD) covers nursing homes and long-term care. In most cases, in-home care for the elderly is covered under the Star + Plus Waiver program in Texas, and benefits can include home care, assisted living in some circumstances, environmental adaptive aids, home modifications, medical care and supplies, personal care, physical and occupational therapy, and respite care. To qualify, an individual (1) must have a medical necessity, (2) may not have more than a maximum gross income of $2,829 per month (in 2024), and (3) may not have more than a maximum amount of $2,000 in available resources. If an individual has too much income, a Qualified Income Trust can be used to divert income for eligibility purposes, and often resources can be invested in exempt resources (such as a home, car, and certain types of retirement accounts).
Medical and Financial Powers of Attorney
Medical and Financial Powers of Attorney
Medical and Financial Powers of Attorney
Medical Powers of Attorney (sometimes referred to as Living Wills, Advanced Directives, or Medical Directives) allow you to set forth your wishes as to medical care and life prolonging procedures and to appoint someone to carry out these decisions in the event you become incapacitated. These documents make certain that your wishes are both known and carried out, and that they can ensure a person of your choosing will be responsible for directing your medical care. Financial durable powers of attorney are legal documents that allow you to appoint someone to manage your financial affairs in the event you become incapacitated. A financial durable power of attorney (“DPOA”) can be limited to certain powers and certain assets, or it can be very broad and can encompass broad powers over all categories of assets. Certain powers, like the power of an agent to make gifts or establish trusts on your behalf, are important considerations for long-term care and Medicaid planning as we age, and those powers must be specifically set out in the DPOA. As a result, the terms of a DPOA and the powers granted under a DPOA may change considerably over time and should be reviewed periodically to be certain they grant all necessary powers and will continue to carry out your wishes as you age.
Wills & Trusts
Medical and Financial Powers of Attorney
Wills & Trusts
A Will is a legal document that spells out your wishes as to who will receive your assets when you pass away and designates someone (called the Executor) to pay your final debts and distribute your assets according to your wishes. When you pass away, the Will is filed with the probate court where you live, and the court appoints the Executor and assures your wishes are carried out. A living trust or inter vivos trust is a trust you establish during your lifetime. A properly funded trust allows your estate to bypass probate, reducing the time and expenses incurred when you pass away. Many financial institutions will not accept powers of attorney that are "springing", meaning they only go into effect if you are disabled, as there have been many cases involving fraud or forged documents. As a result, a trust makes it much easier for your family or loved ones to manage and protect your assets if you become incapacitated. Adding loved ones to your financial accounts can have unintended consequences, whereas a trust preserves your ownership of the assets and assures that the assets pass according to your wishes when you pass away.
Guardianships and Alternatives to Guardianships
Guardianships
Alternatives to Guardianship
Alternatives to Guardianship
When a child with special needs turns 18, he or she is considered an adult, so parents lose the ability to communicate with doctors, teachers, and other healthcare providers on their behalf. A guardianship is the legal process whereby one person, the guardian, is appointed by a court to protect a person with disabilities, the Ward. A guardianship is the most restrictive action taken to protect a person with disabilities. It strips the individual of his or her rights, including the right to vote, to marry, or to participate in his or her own decision making and free will. It is an expensive, adversarial process that is usually permanent. Once in place, the court supervises and directs the care, treatment, placement, support and maintenance of the child for the child’s lifetime, and the guardian must file annual reports with the court. As a result, we always encourage clients to look at alternatives to guardianship that give people with disabilities support to make decisions without taking away their rights. guardianships and guardianship alternatives
Alternatives to Guardianship
Alternatives to Guardianship
Alternatives to Guardianship
There are many alternatives to guardianship that give people with special needs support to make decisions without taking away their rights. If a child is able to communicate his or her wishes, the child can sign certain documents that will allow someone to assist the child with his or her finances and medical decisions such that a guardianship is not required. A child can sign a financial power of attorney that allows a parent or loved one to assist with financial decisions, insurance, and benefits programs. The authority of a parent acting under a power of attorney can extend to and include each and every action or power which a child may carry out through any agent or guardian. The parent may have all rights, power and authority to act for the child that the child would have with respect to his or her own person or property in the same way as the parent would if appointed as guardian. Powers of attorney are much less expensive to set up than a guardianship and can save thousands of dollars in legal expenses. Powers of attorney avoid ongoing court involvement while protecting the child’s interests and allow the child to retain all of his or her rights. Powers of attorney can appoint one or more successors in the event the parent passes away, are easy to modify, and are the least restrictive method of providing protection for the child while still allowing the child to develop his or her own special skills and talents. Texas law also recognizes supported decision-making agreement (SDMA) as an alternative to guardianship. SDMAs allow people with disabilities to make their own decisions and stay in charge of their lives while receiving the help and assistance they need to do so. These documents empower someone to assist the child with special needs without the necessity of filing for guardianship and involving the court in the child’s life.