Special needs
trust attorney
in Houston

Supplemental Security Income and Medicaid are means-tested. To qualify, a person’s countable resources must stay under a limit that has not moved in more than three decades.

Now picture a parent who leaves a $60,000 inheritance to a son with an intellectual disability. The month that money arrives, he is over the resource limit. SSI stops. The Medicaid that pays for his day program and his medications may stop with it. He spends the $60,000 on the things Medicaid was covering, and when it runs out he reapplies — often with a gap in coverage and a waiting list to get back onto services that took years to arrange.

The same $60,000, in a properly drafted third-party special needs trust: it is not his resource. Benefits continue uninterrupted. The trustee uses the money for the things benefits don’t cover — therapies, a better wheelchair, a laptop, a trip to see his sister — for as long as it lasts. And whatever remains at his death goes to whoever you named, with no payback to the state.

1. Third-party special needs trust

Funded with someone else’s money — yours, a grandparent’s, an aunt’s. This is the one most parents need. It can be created inside your will (testamentary) or as a standalone trust that relatives can contribute to now and name as a beneficiary on their own policies and accounts.

• No Medicaid payback. Whatever remains at your loved one’s death passes to the remainder beneficiaries you name — siblings, a charity, whoever you choose.
• Can be funded during your lifetime or at your death.
• Everyone in the extended family can direct gifts and beneficiary designations to it.

2. First-party (self-settled) special needs trust — the “d4A” trust

Funded with the beneficiary’s own money: a personal injury settlement, back-due Social Security, an inheritance that arrived outright, or a divorce award. Authorized by 42 U.S.C. § 1396p(d)(4)(A).

• The beneficiary must be under age 65 when the trust is established and funded.
• The beneficiary must be disabled as defined by Social Security.
• The trust must include a Medicaid payback provision: at the beneficiary’s death, the state is reimbursed for medical assistance paid, up to the amount remaining.
• Since the Special Needs Trust Fairness Act of 2016, a beneficiary with capacity may establish their own; before that only a parent, grandparent, guardian, or court could.

3. Pooled trust — the “d4C” trust

Authorized by 42 U.S.C. § 1396p(d)(4)(C) and managed by a nonprofit association, which pools assets for investment while keeping a separate sub-account for each beneficiary. Useful for smaller amounts, for beneficiaries over 65 in some circumstances, and where no suitable individual trustee exists. Retained amounts and payback terms vary by organization, so the specific program matters.

The order matters enormously. If you plan ahead, your money goes into a third-party trust with no payback. If you leave it outright and the family scrambles afterward, the same money now belongs to the beneficiary — and the only fix is a first-party trust with a Medicaid payback. Identical dollars, very different outcome, decided entirely by whether the planning happened first.

The guiding principle is supplement, don’t replace. The trust pays for what benefits do not cover.

• Therapies, equipment, and medical care not covered by Medicaid
• Education, tutoring, job coaching, and vocational training
• A computer, tablet, cell phone, and internet service
• Travel, recreation, hobbies, and a companion’s costs to travel along
• A vehicle and its insurance, maintenance, and modifications
• Personal care attendants beyond what Medicaid authorizes
• Furniture, clothing, haircuts, and personal items
• Funeral and burial arrangements

Two hard rules for the trustee. Never distribute cash directly to the beneficiary — pay vendors and providers instead. And be deliberate about food and shelter: distributions for those categories are treated as in-kind support and maintenance and can reduce the SSI payment. Sometimes that trade is worth it. It should always be a decision, not an accident.

An ABLE account is a tax-advantaged savings account for a person whose disability began before a qualifying age. For 2026 the annual contribution limit is $20,000. Earnings grow tax-free and qualified disability expenses come out tax-free.

Where ABLE is better

• Small amounts and everyday spending.
• The beneficiary can control the account themselves — genuinely meaningful for someone who wants independence.
• Cheap and fast to open. No drafting, no trustee.
• Unlike a trust, ABLE funds can be used for food and shelter without the in-kind support reduction.

Where a trust is better

• Larger inheritances — ABLE contributions are capped annually and balances above a threshold begin to affect SSI.
• No Medicaid payback in a third-party trust; most ABLE accounts carry one.
• Professional management and oversight when the beneficiary cannot manage money.
• Terms that can direct where the remainder goes.

Most families should use both. The ABLE account handles monthly spending and gives the beneficiary autonomy. The third-party trust holds the inheritance and the long horizon. They complement each other well, and the trustee can fund the ABLE account from the trust.

A common structure that works well: a family member who knows the beneficiary serves alongside a corporate or professional co-trustee who handles compliance and investments. Another is a pooled trust, where a nonprofit provides the administration and the family stays involved in decisions.

• Leaving the inheritance outright because “it’s not that much.” Against a $2,000 resource limit, almost anything is that much.
• Leaving it to a sibling to manage informally. That money is legally the sibling’s — exposed to their divorce, creditors, and death, with no enforceable duty to the person it was meant for.
• Forgetting the beneficiary designations. A life insurance policy or retirement account still naming your child directly overrides everything the will and trust say. These forms have to be changed to name the trust.
• Not telling the family. A grandparent who leaves $10,000 to your child directly can undo the entire plan. Tell relatives the trust exists and how to direct gifts to it.
• Naming the trust as beneficiary of an IRA without analysis. Retirement accounts payable to trusts carry their own rules, and getting it wrong is expensive. This needs specific drafting.
• Using an out-of-state form. Special needs drafting sits at the intersection of federal benefits law and Texas trust law. Generic documents fail on both sides.
• Waiting. The third-party trust with no payback is available while you are planning. After a settlement lands or an inheritance is received, the only option left carries a Medicaid payback.

Most families should use both. The ABLE account handles monthly spending and gives the beneficiary autonomy. The third-party trust holds the inheritance and the long horizon. They complement each other well, and the trustee can fund the ABLE account from the trust.