Houston Special Needs Planning Attorney

Quick Answer

Planning for a loved one with special needs takes more than simply leaving them an inheritance. The right plan can help protect their access to important benefits while providing for their future. We help families create a plan that gives their loved one long-term financial and legal support.

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Special Needs Planning in Houston, Texas

The first thing parents of a child with special needs find out about estate planning is that the rules are different. Not slightly different. Fundamentally different.

A traditional estate plan that leaves money to a disabled child does the opposite of what the parents intend. The inheritance becomes “countable” for SSI and Medicaid purposes. Benefits the family spent years qualifying for get terminated overnight. The medical coverage that pays for therapy, day programs, group home placement, and a lifetime of care disappears — and the inheritance, no matter how generous, runs out faster than anyone expects.

Special needs planning exists because of this exact problem. The right structures — special needs trusts, ABLE accounts, third-party planning, guardianship and supported decision-making documents — let parents leave assets for the benefit of a disabled child without disrupting the benefits the child depends on. Done correctly, the inheritance supplements the benefits instead of replacing them.

Your Legacy Legal Care® has been doing this work in Houston for over 20 years. We work with parents of children with autism, Down syndrome, intellectual disabilities, cerebral palsy, traumatic brain injury, mental health conditions, and any other diagnosis that creates lifelong dependency on benefits or care.

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What Are the Three Types of Special Needs Trusts in Texas?

Texas (and federal law) recognizes three distinct special needs trust structures, each with its own rules, funding source, and consequences at the beneficiary’s death. Choosing the wrong one is one of the most common — and most expensive — mistakes families make.

1. A first-party special needs trust (also called a “self-settled” or “(d)(4)(A)” trust, after the federal statute) is funded with assets that already belong to the disabled person — typically a personal injury settlement, an inheritance the child received outright, retroactive Social Security benefits, or money saved by the beneficiary before benefits were established. First-party trusts must be established by a parent, grandparent, legal guardian, court, or by the disabled person themselves. The beneficiary must be under age 65 at the time the trust is funded. The critical catch: at the beneficiary’s death, the trust must reimburse the state Medicaid program for benefits paid during the beneficiary’s lifetime before any remaining assets pass to family. This is the “Medicaid payback” provision.
2. A third-party special needs trust is funded with assets that never belonged to the disabled person — typically by parents, grandparents, or other family members through their own estate plan. There is no Medicaid payback at the beneficiary’s death. Whatever remains in the trust passes to the family members named by the parents. This is the trust most Houston families need when they’re planning for a disabled child rather than with assets the child already owns. Every parent of a child with special needs should have one in their estate plan.
3. A pooled special needs trust is administered by a nonprofit organization (in Texas, The Arc of Texas Master Pooled Trust is the largest) that pools the assets of many beneficiaries for investment purposes while maintaining separate accounts for each. Pooled trusts can be either first-party or third-party. They are often the right choice for smaller funding amounts that wouldn’t justify the cost of an individually drafted trust.

The right structure for any family depends on whose money is funding the trust, the beneficiary’s age, the size of the assets involved, who the family wants to manage the trust, and what happens to remaining funds when the beneficiary dies. We walk through the analysis with every family before drafting begins.

What Can a Special Needs Trust Pay For in Texas?

A properly drafted special needs trust can pay for anything that supplements but does not replace the benefits the beneficiary receives. The list is broader than most families assume:

• Education and training, including tuition, tutoring, vocational programs, and continuing education
• Medical and dental care not covered by Medicaid, including specialist consultations, second opinions, alternative therapies, dental work, and over-the-counter medications
• Therapeutic services beyond what insurance covers — physical therapy, occupational therapy, speech therapy, behavioral therapy, equine therapy, music therapy
• Personal care attendants beyond Medicaid-funded hours
• Home modifications for accessibility — ramps, lifts, bathroom modifications, sensory rooms
• Vehicles modified for the beneficiary’s needs
• Recreation and entertainment — vacations, sporting events, movies, concerts, hobbies, pets and pet care
• Computers, phones, internet service, streaming subscriptions
• Clothing and personal grooming beyond the basics
• Furniture and household items for the beneficiary’s living space
• Travel expenses for family members visiting the beneficiary in a residential placement
• Funeral and burial pre-arrangements

The trust can also pay for legal, accounting, and trustee fees, which are usually not chargeable to the beneficiary personally.

What Can a Special Needs Trust Not Pay For in Texas?

The general rule is that the trust cannot pay for anything that would cause the beneficiary to lose SSI or Medicaid eligibility. In practical terms, that means the trust cannot pay cash directly to the beneficiary (which would be treated as countable income), and the trust must be very careful about paying for the beneficiary’s “food and shelter.”

The food-and-shelter restriction is the rule that trips up most families. SSI categorizes housing costs (rent, mortgage, property taxes, homeowner’s insurance, utilities, gas, electricity, water, sewer, garbage), as well as food, as “in-kind support and maintenance” (ISM). When a special needs trust pays for these items, the SSI benefit is reduced — usually by the “presumed maximum value,” which can cut SSI by roughly one-third.

This doesn’t mean the trust can never pay for housing or food. It means the family has to make an informed decision: sometimes paying the rent and accepting a reduced SSI benefit is the right call (the math works out in the beneficiary’s favor), and sometimes it isn’t. The decision should be made deliberately, not by accident.

Other prohibited or risky payments include direct payments of cash, gift cards convertible to cash, and certain forms of asset transfer that could be characterized as gifts to the beneficiary.

This is one of the areas where a drafting attorney and an experienced trustee make the difference between a trust that works and a trust that quietly destroys benefits.

Can a Special Needs Trust Own a House in Texas?

Yes — and for many beneficiaries, it’s the right structure. A special needs trust can purchase, hold title to, and maintain a home that the beneficiary lives in. The home is generally not a countable resource for the beneficiary as long as the trust (not the beneficiary) holds title.

The complication is the SSI ISM rule discussed above: if the trust is paying for the beneficiary’s housing-related expenses (mortgage, utilities, property taxes), SSI benefits may be reduced. The math often still favors the family — the trust-owned home eliminates rent, builds equity in the trust, and provides housing security regardless of program rules. We help families work through whether trust-owned housing makes sense in their specific situation.

What Are the Disadvantages of a Special Needs Trust?

Honest answer: there are tradeoffs, and they’re worth understanding before signing.

• The beneficiary doesn’t have direct access to the funds. All disbursements go through the trustee. For some beneficiaries — particularly higher-functioning adults — this loss of autonomy is the main downside.
• Trustee selection is genuinely difficult. A special needs trust trustee has to understand SSI and Medicaid rules, has to be available for years or decades, has to handle accounting and reporting, and has to make judgment calls about what disbursements help the beneficiary versus what disbursements jeopardize benefits. Family member trustees are well-intentioned but often overwhelmed. Professional trustees charge fees that come out of the trust. There’s no perfect answer — there’s only the best answer for a particular family.
• First-party trusts have the Medicaid payback. Whatever’s left at the beneficiary’s death goes to reimburse the state before family receives anything. For families using a first-party trust because they have to (the beneficiary inherited money outright before the family could plan), the payback can feel like a loss.
• Administrative complexity. Tax returns, accountings, distribution records, coordination with the SSA and HHSC. The trustee work is real and it’s ongoing.
• Cost. Drafting a special needs trust costs more than a basic will because of the technical requirements. Funding it adequately requires either current assets, life insurance, or both.

For most Houston families with a child who depends on benefits, the disadvantages are manageable and the alternative — leaving the inheritance outright and watching benefits terminate — is much worse.

ABLE Accounts vs. Special Needs Trusts

An ABLE account (Achieving a Better Life Experience) is a tax-advantaged savings account specifically designed for people with disabilities, available in Texas through the Texas ABLE Program. Funds in an ABLE account up to a certain amount don’t count against SSI and Medicaid eligibility, the beneficiary can manage the account themselves, and qualified disability expenses can be paid directly without trustee involvement.

ABLE accounts are not a replacement for a special needs trust — they are a complement. The annual contribution limit is much lower than what a trust can hold, and the account has its own restrictions. For most Houston families with a disabled child, the right structure is both — a third-party special needs trust holding the larger long-term assets and an ABLE account handling smaller day-to-day expenses with more flexibility and direct beneficiary access.

To qualify for an ABLE account, the disability must have begun before the beneficiary turned 26 (rising to age 46 in 2026 under recent legislation). We help families decide which combination is right and how to coordinate the two.

Coordinating Special Needs Planning With the Rest of the Estate Plan

A special needs trust in isolation isn’t a plan. It has to be coordinated with:

The parents’ wills and revocable trusts, so that the disabled child’s share of the parents’ estate flows directly into the special needs trust rather than to the child outright.

Beneficiary designations on retirement accounts and life insurance, which pass outside the will and need to be redirected to the trust. This is one of the most commonly missed steps in special needs planning — the parents update their estate plan but never change the IRA beneficiary, and the IRA pays directly to the disabled child at death, immediately disqualifying them from benefits.

Guardianship and supported decision-making documents for the period when the disabled child reaches age 18 and the parents lose automatic legal authority. We address this through our Houston guardianship practice, and we help families decide whether full guardianship, limited guardianship, or a supported decision-making agreement is the right fit.

Letter of intent, a non-legal document the parents prepare describing the beneficiary’s daily routine, medical history, behavioral triggers, communication preferences, food preferences, religious practices, and anything else the future trustee and care providers will need to know. We provide a template and walk families through it.

Coordination with siblings, both as potential trustees and as beneficiaries of the parents’ broader estate. Sibling expectations and roles are one of the most overlooked variables in special needs planning, and one of the most common sources of family conflict later.

Medicaid and waiver program planning for the beneficiary, particularly if the family hasn’t yet qualified for STAR+PLUS, the Home and Community-Based Services (HCS) waiver, the Texas Home Living (TxHmL) program, the Community Living Assistance and Support Services (CLASS) waiver, or other Texas long-term services and supports.

When Houston Families Need to Plan

The textbook answer is “as soon as the disability is diagnosed.” The realistic triggers we see most often:

A child with a developmental disability is approaching age 18 and the family is realizing the legal authority they’ve always had is about to disappear. A grandparent has died and named the disabled grandchild as a beneficiary outright, which has to be fixed quickly to prevent benefit termination. A personal injury settlement is being finalized for a disabled person and the funds need to land in a properly structured trust before they’re paid. The parents have updated wills they signed 15 years ago that leave everything to the kids equally — including the child whose entire world depends on Medicaid. A sibling has been quietly understood as the future caregiver but has never been formally named, prepared, or given the legal authority to act.

Every one of these is a planning moment, and most of them have a closing window. Once benefits are terminated, requalifying can take months. Once a settlement is paid into the wrong account, restructuring it costs more than planning would have.

Why Houston Families Choose Your Legacy Legal Care®

Special needs planning is the practice area where firms most often get the law right and the family wrong. The technical requirements are demanding, but the harder work is understanding what life with a disabled family member actually looks like — the school IEPs, the wait for a HCS slot, the day program transitions at age 22, the question of who keeps the family home running when the parents are gone, the sibling who’s been promised they won’t have to do this alone.

Our team has lived this. Our staff includes parents of children with special needs, and our planning approach reflects the reality of what families actually face. Attorney Kim Hegwood is a Certified Dementia Practitioner and a member of the National Academy of Elder Law Attorneys. The firm has been doing this work in Houston for over 20 years and holds the Houston Chronicle’s Best Trust & Estate Law Firm award.

We operate from five offices across Greater Houston: Clear Lake, the Galleria, Katy, Bay City, and Sugar Land. Most special needs planning engagements are quoted as a flat fee in writing before drafting begins.

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Five offices serving the Greater Houston area and clients across Texas.

Houston Special Needs Planning FAQ

What Is a Special Needs Trust?

A special needs trust is a legal arrangement that holds assets for the benefit of a person with a disability without disrupting their eligibility for SSI, Medicaid, and other means-tested government benefits. The trustee distributes funds for the beneficiary’s supplemental needs — anything not already covered by benefits — while the beneficiary remains qualified for the programs they depend on.

Who Qualifies for a Special Needs Trust in Texas?

The beneficiary must have a disability as defined by the Social Security Administration. For a first-party special needs trust, the beneficiary must be under age 65 when the trust is funded. Third-party trusts have no age limit. The disability does not have to be lifelong — many trusts are funded for beneficiaries with traumatic brain injuries, mental health conditions, or other later-onset disabilities.

How Does a Special Needs Trust Work?

The grantor (or, for first-party trusts, the beneficiary or court) transfers assets to a trustee, who holds and manages them under the trust agreement. The trustee makes discretionary distributions for the beneficiary’s supplemental needs, following federal and state rules about what can and can’t be paid. The beneficiary doesn’t own the trust assets and doesn’t have direct access to the funds, which is what allows them to remain qualified for benefits while still receiving the support the trust provides. See our overview of how special needs trusts work.

How Do You Set Up a Special Needs Trust in Texas?

Engage a Texas estate planning attorney with experience in disability and Medicaid law. The drafting process typically takes two to four weeks: a strategy session to identify the right type of trust and trustee, a drafting period, and a signing meeting. Funding the trust — actually moving assets into it, updating beneficiary designations on retirement accounts and life insurance, and (for first-party trusts) sometimes obtaining court approval — is a separate step that we include as part of the engagement.

Can a Parent Be the Trustee of Their Child’s Special Needs Trust?

Yes for third-party trusts. Most Texas families name the parents as initial trustees with successor trustees (often a sibling, a professional trustee, or a corporate trustee) lined up for when the parents can no longer serve. For first-party trusts, the rules are stricter and the trustee selection has more constraints. We walk through trustee selection carefully because the choice has long-term consequences for both the family and the beneficiary.

Does a Special Needs Trust Affect Medicaid in Texas?

A properly drafted special needs trust does not count against Medicaid eligibility — that’s the entire point of the structure. Texas HHSC has a specific exception for trusts that meet the federal special needs trust requirements, codified at HHSC Medical Programs Handbook §F-6700. A poorly drafted trust, or a “support trust” that doesn’t include the required language, can cause the entire trust corpus to be treated as a countable resource and disqualify the beneficiary from Medicaid entirely.

What Happens to a Special Needs Trust When the Beneficiary Dies?

For a third-party trust, whatever’s left passes to the remainder beneficiaries the parents named — typically siblings, nieces and nephews, or charity. There’s no Medicaid payback. For a first-party trust, the trust must reimburse the state Medicaid program for benefits paid during the beneficiary’s lifetime before any remaining assets pass to family. This is one of the most important distinctions between the two trust types.

Can a Special Needs Trust Be Changed After It’s Created?

Most special needs trusts are irrevocable, which means they can’t be unilaterally changed by the grantor. But they can include built-in flexibility — trust protector provisions, decanting authority, modification provisions for changes in law — that allow the trust to adapt to changing circumstances. We build that flexibility into every trust we draft because the laws affecting disability planning change frequently and the trust may need to operate for 50 years or more.