A special needs trust is established to prevent people from losing benefits from certain government programs after receiving a settlement. An influx of wealth can make one ineligible for benefits from Supplementary Security Income (SSI), Veterans Aid and Attendance, Medicaid, and government housing. A special needs trust supplements but does not replace, these benefits by paying for non-covered services or equipment. Below are the applicable laws to establishing a special needs trust in Texas.
Federal Law
U.S. Code Section 1396p.(d)(4)(A).
(4) This subsection shall not apply to any of the following trusts:
(A) A trust containing the assets of an individual under age 65 who is disabled (as defined in section 1382c(a)(3) of this title) and which is established for the benefit of such individual by the individual, a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this subchapter. Full text
Texas Law
F-6710 Special Needs Trust
Revision 17-2; Effective June 1, 2017
A legal review of the instrument, device or arrangement that establishes the trust is necessary. Contact with regional legal staff is based on regionally established procedures. Check with your supervisor for regionally established procedures. Send a copy of the documents to the regional attorney for review. See Appendix XVI, Documentation and Verification Guide.
Special needs trust:
A special needs trust is a revocable or irrevocable trust established with the assets of a person under age 65 who meets the SSI program’s disability criteria. The trust must be established for the person’s benefit by a parent, grandparent, legal guardian, a court or self. Beginning December 13, 2016, people under age 65 who meet the SSI program’s disability criteria may establish a special needs trust for their own benefit. The trust must include a provision that the state is designated as the residuary beneficiary to receive, at the person’s death, funds remaining in the trust equal to the total amount of Medicaid paid on their behalf.
Use Form H1210, Subrogation (Trusts/Annuities/Court Settlements), to report to the Provider Claims Payment Section any potential paybacks to the state as the residuary beneficiary of special needs trusts.
This trust exception continues even after a person becomes age 65 if the individual continues to meet the disability criteria for the SSI program. However, additions or augmentations to the trust after the person becomes age 65 are a transfer of assets.
If a person currently is receiving disability benefits from SSI, RSDI or Railroad Retirement (RR), their disability is automatically established. Verify that the SSI, RSDI or RR benefit is a disability benefit. Otherwise, disability must be established.
Texas, Health and Human Services, F-6710 Special Needs Trust, Revision 17-2 (2017).
