Ross & Shoalmire provides comprehensive special needs trust services for Texas and Arkansas families caring for loved ones with disabilities. Our experienced elder law attorneys help parents, grandparents, and family members establish trusts that protect government benefits while providing for enhanced quality of life. Whether you need a third-party special needs trust for estate planning or a first-party trust for settlement funds, we guide families in Texarkana, Tyler, Paris, Longview, Magnolia, and throughout the region with compassionate, expert legal counsel.
Schedule Your Free Consultation
What Is a Special Needs Trust?
A special needs trust is a legal arrangement designed to hold and manage assets for a person with disabilities without jeopardizing their eligibility for critical government benefits like Supplemental Security Income (SSI) and Medicaid. These trusts provide supplemental resources that enhance quality of life while preserving essential benefit programs that cover basic living expenses and medical care.
Government benefit programs have strict asset and income limits. Individuals receiving SSI typically cannot have more than $2,000 in countable assets. Direct inheritances, personal injury settlements, or gifts can disqualify a disabled person from benefits they depend on for survival. Special needs trusts solve this problem by holding assets in trust rather than in the beneficiary's name.
The trust is managed by a trustee who distributes funds for the beneficiary's supplemental needs according to specific rules that comply with federal and state regulations. When properly structured, the trust assets are not counted toward benefit eligibility limits, allowing the disabled individual to receive both government assistance and private support.
Why Special Needs Trusts Matter
For families of individuals with disabilities, special needs trusts provide peace of mind. Parents can ensure their disabled child will be cared for throughout their lifetime without losing access to healthcare and income support. Grandparents can leave meaningful inheritances that truly benefit their grandchildren with special needs. Personal injury victims can preserve settlement funds while maintaining Medicaid coverage for ongoing medical treatment.
Who Needs a Special Needs Trust?
Special needs trust planning is essential for any family with a disabled member who receives or may receive means-tested government benefits. These trusts serve families throughout Texas and Arkansas, including communities in Texarkana, Tyler, Paris, Longview, and Magnolia.
You should consider a special needs trust if:
- You have a child with disabilities who receives or will likely need SSI, Medicaid, or other means-tested benefits
- You want to leave an inheritance to a disabled family member without affecting their government assistance
- Your disabled family member received funds from a personal injury settlement, lawsuit, or insurance payout
- A disabled relative unexpectedly inherited money or property that could disqualify them from benefits
- You're planning your estate and have a disabled beneficiary among your heirs
- Your loved one has a progressive condition like early-onset Alzheimer's or dementia and may need government benefits in the future
Common Disabilities and Conditions
Special needs trusts benefit individuals with a wide range of disabilities and conditions, including intellectual and developmental disabilities, autism spectrum disorders, cerebral palsy, Down syndrome, traumatic brain injuries, spinal cord injuries, mental health conditions, chronic illnesses, and progressive conditions like Alzheimer's disease or dementia diagnosed before age 65.
Our special needs trust attorneys in Texas and Arkansas help families protect loved ones with any qualifying disability that creates functional limitations and long-term support needs.
Types of Special Needs Trusts
Understanding the different types of special needs trusts is crucial for proper planning. The type of trust you need depends on who owns the assets being placed in trust and the source of those funds.
Third-Party Special Needs Trusts![special needs]()
Third-party special needs trusts are funded by someone other than the disabled beneficiary, typically parents, grandparents, or other family members. These are the most common type of special needs trust used in estate planning and offer significant advantages.
Key features of third-party special needs trusts include:
- No Medicaid payback requirement: When the beneficiary dies, remaining trust assets pass to designated remainder beneficiaries without reimbursing Medicaid
- Flexible remainder provisions: The person creating the trust decides who receives remaining assets after the beneficiary's death
- Estate planning tool: Integrated seamlessly into wills and living trusts
- Generational planning: Can benefit multiple generations of family members with disabilities
Third-party special needs trusts are typically established by parents as part of comprehensive estate planning, ensuring disabled children continue receiving care after the parents pass away.
First-Party Special Needs Trusts (Self-Settled Trusts)
First-party special needs trusts hold assets that belong to the disabled person themselves. These trusts are required when the disabled individual receives money directly, such as from a personal injury settlement, inheritance received in their own name, back payment of benefits, or divorce settlement.
First-party trusts have stricter requirements:
- Beneficiary must be under age 65 when the trust is established
- Must meet Social Security's definition of disability
- Medicaid payback required: Upon the beneficiary's death, the state Medicaid program must be reimbursed for benefits paid during the beneficiary's lifetime before remainder beneficiaries receive anything
- Can be established by: The disabled individual (if legally competent), a parent, grandparent, legal guardian, or court
Our Texas and Arkansas special needs trust lawyers regularly establish first-party trusts for personal injury victims and others who receive significant funds while needing to preserve Medicaid eligibility.
Pooled Trusts
Pooled special needs trusts are managed by nonprofit organizations that combine resources from many beneficiaries for investment purposes while maintaining separate accounts for each individual. These can be useful for smaller amounts or when family members cannot serve as trustees. However, pooled trusts typically retain a portion of remaining funds upon the beneficiary's death, making individual trusts preferable when assets justify the additional cost.
How Special Needs Trusts Protect Government Benefits
The primary purpose of a special needs trust is preserving eligibility for means-tested government programs that provide essential support to individuals with disabilities. Understanding how these trusts protect benefits is crucial for effective planning.
SSI (Supplemental Security Income)
SSI provides monthly cash payments to disabled individuals with limited income and resources. In 2025, the SSI resource limit is $2,000 for individuals. Assets in a properly drafted special needs trust are not counted toward this limit, allowing beneficiaries to maintain their monthly SSI income.
SSI benefits are particularly important because they provide automatic Medicaid eligibility in both Texas and Arkansas. Losing SSI almost always means losing Medicaid coverage, making benefit preservation critical.
Medicaid
Medicaid provides comprehensive healthcare coverage for individuals with disabilities, including doctor visits, hospitalizations, prescription drugs, medical equipment, therapy services, and long-term care. Texas and Arkansas Medicaid programs have strict asset limits similar to SSI.
Special needs trusts allow disabled individuals to receive supplemental support without exceeding Medicaid asset thresholds. This is especially important for people requiring ongoing medical care, therapy, or long-term support services covered by Medicaid.
Other Means-Tested Benefits
Special needs trusts also protect eligibility for other programs with asset limits, including housing assistance (Section 8 vouchers), food assistance (SNAP), and state-specific disability programs. Proper trust administration ensures beneficiaries can access all available support programs.
What Makes a Trust "Special Needs" Compliant?
Several critical elements make a trust compliant with government benefit rules:
- Discretionary distributions only: The trustee has complete discretion over whether and when to make distributions; the beneficiary cannot demand payments
- No direct cash to beneficiary: Trust funds must be used to purchase goods and services, not given as cash that could count as income
- Proper distribution restrictions: Specific rules govern what the trust can and cannot pay for to avoid reducing benefits
- Supplemental purpose: Trust supplements, rather than replaces, government benefits
Our experienced trust attorneys draft special needs trusts with precise language meeting all federal and state requirements for benefit preservation in Texas and Arkansas.
What Can Trust Funds Be Used For?
Special needs trust funds provide meaningful support that enhances quality of life while protecting government benefits. Understanding allowable uses helps families appreciate the value these trusts provide.
Permitted Trust Expenses
Special needs trust funds can pay for a wide range of supplemental needs:
- Medical and dental care not covered by Medicaid, including co-pays, elective procedures, specialized treatments, and alternative therapies
- Therapy services such as physical therapy, occupational therapy, speech therapy, music therapy, and recreational therapy
- Education and training including tuition, books, tutors, vocational training, and life skills programs
- Recreation and entertainment like movies, concerts, hobbies, club memberships, and vacations
- Electronic equipment including computers, tablets, smartphones, televisions, and adaptive technology
- Transportation such as vehicle purchases, modifications, insurance, fuel, and specialized transportation services
- Home furnishings and modifications including furniture, wheelchair ramps, bathroom adaptations, and home accessibility improvements
- Personal care attendants beyond what government programs provide
- Clothing and personal items
- Pet care for companion animals
- Legal and professional services
Restricted Uses Requiring Careful Planning
Certain expenses require careful handling because they can reduce SSI benefits:
- Food and shelter: Payments for these basic needs typically reduce SSI by up to one-third. Strategic planning can minimize this impact while still providing housing support
- Cash payments: Never appropriate, as cash given to the beneficiary counts as income
- Regular monthly payments: May be treated as income; distributions should vary in timing and amount
Our special needs trust attorneys in Texarkana and throughout Texas and Arkansas help trustees understand distribution rules and maximize benefit preservation while meeting the beneficiary's needs.
Special Needs Trusts in Estate Planning
For parents and grandparents of children with disabilities, special needs trusts are an essential component of comprehensive estate planning. Proper planning ensures your disabled loved one is cared for throughout their lifetime without losing vital government benefits.
Disinheriting to Protect
The counterintuitive reality of special needs planning is that you must disinherit your disabled loved one in order to protect them. Leaving assets directly to a disabled beneficiary can disqualify them from benefits and potentially leave them worse off than if they received nothing.
Instead, your will or living trust should explicitly state that your disabled family member receives nothing directly. All assets intended for their benefit should instead be directed to their special needs trust.
Integrating Special Needs Trusts Into Your Estate Plan
Special needs trusts can be incorporated into your estate planning in several ways:
- Testamentary special needs trusts: Created in your will, taking effect upon your death
- Living special needs trusts: Established during your lifetime as standalone trusts or as part of a revocable living trust
- Contingent trusts: Created only if needed based on circumstances at your death
We help Texas and Arkansas families choose the right structure based on their unique circumstances, family dynamics, and planning goals.
Protecting Against Unintentional Inheritances
Special needs planning must address potential inheritances from others. Even if your estate plan properly directs assets to a special needs trust, your disabled loved one could still receive disqualifying assets from well-meaning relatives or friends.
Protective measures include:
- Educating extended family members about the importance of not leaving direct inheritances
- Ensuring life insurance policies name the special needs trust as beneficiary
- Including "poison pill" provisions in the trust that prevent acceptance of direct gifts
- Establishing the trust during your lifetime so others can name it as beneficiary
Funding Special Needs Trusts
Third-party special needs trusts can be funded during your lifetime or at death through your will, living trust, life insurance, retirement accounts, or other transfer-on-death designations. Many families establish unfunded trusts during their lifetime and designate them as beneficiaries of life insurance, providing substantial resources for their disabled loved one's care.
First-Party Special Needs Trusts
When a person with disabilities receives assets in their own name, a first-party special needs trust becomes necessary to preserve government benefit eligibility. These situations require immediate attention from experienced special needs trust lawyers.
When First-Party Trusts Are Needed
Common situations requiring first-party special needs trusts:
- Personal injury settlements: Accident victims with disabilities who receive lawsuit settlements or insurance payouts
- Unexpected inheritances: When someone dies without proper planning and leaves assets directly to a disabled person
- Divorce settlements: Property divisions where the disabled spouse receives significant assets
- Back payment of benefits: Large lump-sum payments from Social Security or other sources
- Workers' compensation awards: Disability payments that exceed resource limits
Critical Requirements for First-Party Trusts![special needs attorney]()
First-party special needs trusts have strict requirements under federal law:
- Age requirement: The disabled individual must be under age 65 when the trust is established
- Disability requirement: Must meet Social Security Administration's definition of disability
- Who can establish: The disabled person (if competent), parent, grandparent, legal guardian, or court
- Medicaid payback: Trust must include provisions for reimbursing state Medicaid upon the beneficiary's death
Medicaid Payback Provisions
The most significant difference between first-party and third-party trusts is the Medicaid payback requirement. When a first-party trust beneficiary dies, remaining trust assets must first reimburse the state Medicaid program for all benefits paid during the beneficiary's lifetime before any funds pass to family members.
This requirement applies in both Texas and Arkansas. Proper drafting ensures the payback provision meets state-specific requirements while protecting the interests of remainder beneficiaries to the extent possible.
Personal Injury Settlements
Personal injury cases involving plaintiffs with disabilities require careful planning. Our attorneys work with personal injury lawyers to structure settlements that preserve Medicaid and SSI eligibility. This involves establishing first-party special needs trusts before settlement funds are disbursed and coordinating with Medicare regarding conditional payments and future medical costs.
For disabled children injured through negligence, we often establish trusts through guardianship proceedings, ensuring court approval and proper protection for settlement proceeds.
Special Needs Trust Requirements in Texas and Arkansas
While federal law governs special needs trusts, Texas and Arkansas each have specific requirements and procedures that must be followed for effective planning.
Texas Special Needs Trust Law
Texas law recognizes special needs trusts under both federal law and the Texas Trust Code. Texas special needs trust attorneys must navigate state-specific requirements for trust creation, administration, and interaction with Texas Medicaid programs.
Key Texas considerations include compliance with Texas Health and Human Services Commission regulations, Texas Medicaid estate recovery rules, state-specific trust administration requirements, and Texas guardianship procedures when court involvement is necessary.
Arkansas Special Needs Trust Law
Arkansas similarly recognizes special needs trusts under federal and state law. Arkansas special needs trust lawyers must understand Arkansas Department of Human Services Medicaid policies, Arkansas trust law requirements, state estate recovery procedures, and Arkansas guardianship and court procedures.
Multi-State Planning
Ross & Shoalmire attorneys are licensed in both Texas and Arkansas, providing unique expertise for families with connections to both states. This matters when disabled family members may move between states or when families own property in both jurisdictions.
We help families throughout the region, including Texarkana families with ties to both states, Tyler and East Texas families considering Arkansas resources, Magnolia and Arkansas families with Texas connections, and families planning for potential relocations.
Choosing the Right Trustee
The trustee manages the special needs trust and makes all distribution decisions. Choosing the right trustee is one of the most important decisions in special needs planning.
Trustee Responsibilities
Special needs trust trustees must:
- Manage and invest trust assets prudently
- Make distribution decisions that enhance the beneficiary's life while preserving benefits
- Maintain detailed records of all transactions
- File necessary tax returns and accountings
- Communicate with benefit program administrators
- Understand complex government benefit rules
- Balance current needs with long-term sustainability
Individual Trustees
Many families choose individual trustees, typically parents, siblings, or other trusted family members. Individual trustees provide personal knowledge of the beneficiary's needs and preferences, flexibility in decision-making, and typically no fees for services.
However, individual trustees may lack expertise in benefit rules, face conflicts of interest if they're also remainder beneficiaries, or may become unable to serve due to their own aging or health issues.
Corporate Trustees
Banks and trust companies offer professional trust management with expertise in administration and investments, continuity of service regardless of individual circumstances, and no personal conflicts of interest. However, corporate trustees typically charge fees, may lack personal knowledge of the beneficiary, and might apply rigid policies that don't serve the beneficiary's best interests.
Co-Trustees
Many families use co-trustees, combining an individual trustee's personal knowledge with a professional trustee's expertise. This arrangement can provide the best of both approaches while creating checks and balances in decision-making.
Successor Trustees
Your special needs trust must name successor trustees who will serve when the initial trustee cannot continue. Planning for multiple generations of trustees ensures continuity throughout the beneficiary's lifetime. We help families develop comprehensive succession plans that provide long-term security.
Special Needs Trust FAQs
What is a special needs trust and who needs one?
A special needs trust is a legal arrangement that holds assets for a person with disabilities without disqualifying them from government benefits like SSI and Medicaid. Anyone with a disabled family member who receives or may receive means-tested government benefits should consider establishing a special needs trust. These trusts allow disabled individuals to enjoy supplemental resources that enhance their quality of life while preserving essential government assistance that covers basic living expenses and medical care. Our experienced special needs trust attorneys in Texas and Arkansas help families protect their loved ones with disabilities.
What is the difference between a first-party and third-party special needs trust?
A first-party special needs trust holds assets that belong to the disabled person themselves, such as personal injury settlements, inheritances received directly, or other funds in their own name. These trusts require Medicaid payback provisions, meaning the state must be reimbursed for benefits paid when the beneficiary dies. A third-party special needs trust is funded by family members or others and does not require Medicaid reimbursement upon death, making it the preferred option for estate planning. Third-party trusts allow remaining assets to pass to family members after the beneficiary's death without state recovery.
How does a special needs trust protect government benefits?
Properly structured special needs trusts are not counted as available resources for SSI or Medicaid eligibility purposes. The trust holds assets and the trustee distributes funds for supplemental needs like education, therapy, recreation, medical equipment, and comfort items that government programs do not cover. Meanwhile, the beneficiary continues receiving essential government benefits for basic living expenses, healthcare, and support services. The trust supplements rather than replaces government benefits, ensuring comprehensive support for the individual with disabilities.
What can special needs trust funds be used for in Texas and Arkansas?
Special needs trust funds can pay for a wide range of supplemental items and services not covered by government benefits. Allowable expenses include education and vocational training, therapy services beyond what Medicaid provides, medical and dental care not covered by insurance, recreational activities and entertainment, electronic equipment and adaptive technology, transportation including vehicle purchases and modifications, home furnishings and accessibility modifications, personal care attendants, hobbies and club memberships, vacations, and other quality-of-life expenses. Trust funds generally cannot be used for basic food and shelter without potentially reducing SSI benefits, though strategic planning can address housing needs.
Can I leave an inheritance to my disabled child without affecting their benefits?
Yes, by establishing a third-party special needs trust and directing your inheritance to that trust rather than directly to your disabled child. Your estate planning documents should explicitly disinherit your disabled child personally and instead leave all intended assets to their special needs trust. This protects their government benefit eligibility while ensuring they receive the support you intend to provide. Our Texas and Arkansas estate planning attorneys help families create comprehensive plans that protect disabled beneficiaries while preserving eligibility for SSI, Medicaid, and other essential programs.
What happens to remaining funds when a special needs trust beneficiary dies?
The disposition of remaining trust assets depends on the type of trust. For first-party special needs trusts, remaining funds must first reimburse state Medicaid programs for all benefits paid during the beneficiary's lifetime. Any balance after Medicaid payback goes to remainder beneficiaries named in the trust. For third-party special needs trusts, there is no Medicaid payback requirement, and all remaining assets pass directly to the remainder beneficiaries designated by the person who created the trust, typically family members or other loved ones.
Contact Our Special Needs Trust Attorneys
Protecting your loved one with disabilities requires specialized legal knowledge and compassionate guidance. The experienced special needs trust attorneys at Ross & Shoalmire are ready to help your family create comprehensive plans that preserve government benefits while providing enhanced quality of life.
Serving Texas and Arkansas Families From Multiple Locations
Ross & Shoalmire serves families throughout Northeast Texas and Arkansas from convenient office locations. We're proud to help families secure their disabled loved ones' futures across Texas communities including Texarkana, Tyler, Paris, Longview, Marshall, Mount Pleasant, and beyond, as well as Arkansas communities including Magnolia, Hope, El Dorado, Camden, and throughout the region.
Our office locations:
- Texarkana Office (Main): 1820 Galleria Oaks Dr, Texarkana, TX 75503 | Phone: 903-223-5653
- Tyler Office: Serving Smith County and East Texas
- Paris Office: Serving Lamar County and Northeast Texas
- Longview Office: Serving Gregg County and the Ark-La-Tex region
- Magnolia Office: Serving Columbia County and Southern Arkansas
Schedule Your Free Consultation Today
Don't leave your disabled loved one's future to chance. Proper special needs planning ensures they receive both government benefits and family support throughout their lifetime. Contact Ross & Shoalmire today to discuss establishing a special needs trust. We'll review your situation, explain your options, and create a comprehensive strategy that protects your family member with disabilities.
Whether you need a third-party special needs trust for estate planning, a first-party trust for settlement funds, or guidance on Medicaid planning for a loved one with disabilities, our experienced elder law attorneys provide the knowledge and compassion your family deserves. We understand the challenges families face caring for loved ones with special needs, and we're here to help you plan for their long-term security and wellbeing.
