A worked-through account of Texas rules on decision-making authority, special needs trusts, SSI and Medicaid waiver eligibility for families planning around a lifelong disability. Written by one person who had to learn it and saw no reason for the next person to start cold.
A will that names a son or daughter with a lifelong disability alongside their siblings, in equal shares, is the most common expensive mistake in Texas estate planning. Nothing about it looks wrong. The money arrives, it lands in a bank account in that person's name, and within a month the Supplemental Security Income check stops and the Medicaid coverage attached to it goes with it. What follows is a scramble to undo something that a single paragraph in the will would have prevented. The comparison below is between the tools that hold that money instead, and what a careful reader checks before choosing one.
The limit that does the damage, and the coverage that rides on it
SSI, which the Social Security Administration administers, is a means-tested program with a countable resource limit of $2,000 for an individual, unchanged for decades. An inheritance is treated as income in the month it is received and as a resource every month afterward that it is still sitting there. In Texas the practical injury is rarely the cash benefit itself. It is that SSI eligibility is the doorway to Medicaid, and Medicaid eligibility is what carries the waiver services: attendant care, day habilitation, respite, the slot on an interest list that took fifteen years to reach. Losing $841 a month is survivable. Losing the slot is not.
So the first thing to check is not the size of the bequest but what it is attached to. A person receiving SSI and a waiver has more at stake than a person on SSDI and Medicare, whose benefits are not resource-tested. Read the actual award letters before assuming which situation you are in.
First-party and third-party trusts are not two flavors of the same thing
The distinction that governs everything else is whose money went in. A third-party special needs trust holds assets that never belonged to the beneficiary: a parent's estate, a grandparent's gift, a life insurance death benefit payable to the trust rather than the person. It has no Medicaid payback. Whatever remains at the beneficiary's death goes wherever the person who funded it said it should go, typically to siblings. A first-party trust holds the beneficiary's own money, usually a personal injury settlement, a retroactive benefits award, or an inheritance that arrived directly because nobody redirected it. It must be established before the beneficiary turns 65, and at death the state must be reimbursed for Medicaid it paid on that person's behalf, which in a long life can consume the entire remainder.
That payback is the whole argument for planning in advance. The same dollars, routed through a will into a third-party trust instead of into a checking account, are never subject to it. Check the beneficiary designations on retirement accounts and life insurance policies too, since those pass outside the will entirely and are a frequent source of accidental first-party money.
Pooled trusts and ABLE accounts as the smaller instruments
A pooled trust run by a nonprofit accepts modest amounts that no bank would administer alone, invests them together, and keeps a separate accounting for each beneficiary. Sub-accounts can be first-party or third-party, so ask which one you are opening and what happens to the remainder, because some pooled programs retain it for charitable purposes rather than paying it out to family. Fees are usually a percentage of the account plus an enrollment charge, and they are worth comparing directly against a corporate trustee's minimum.
An ABLE account, available in Texas through the state's program, is simpler and more limited. Annual contributions are capped at the federal gift tax exclusion amount, the beneficiary controls spending on qualified disability expenses, and balances up to $100,000 are disregarded for SSI. It is excellent for the things a trustee handles badly: a phone bill, a bus pass, a laptop. It is not where an inheritance goes.
The trustee question outlives the trust document
Most families name a parent as initial trustee and a sibling as successor, then stop. Check the second and third layers. A sibling may be capable at forty and unwell at sixty, may move out of state, may not want the job, or may be the beneficiary's own remainder beneficiary, which is a conflict worth naming out loud. Consider a corporate trustee for investment and distribution decisions with a family member holding the power to remove and replace it, or a pooled trust named as the fallback if every individual named has died or declined. Write a letter of intent describing routines, providers and preferences, and update it.
The paragraph that fixes all of this is short, and it costs a fraction of what an emergency first-party trust costs after the check has cleared.