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Special-needs trust
· Legal document or tool
Standard practiceWhat most planners, CPAs and attorneys recommend.
A trust that holds money for a person with a disability without disqualifying them from SSI and Medi-Cal.
See it on the Personal Finance & Estate map →How it works
SSI counts assets over $2,000, so an outright inheritance can end benefits. Instead, a trustee pays for extras: therapies, equipment, education, travel, phone, care management. Two types: a third-party trust funded by parents or relatives, with no Medi-Cal payback, often built into the parents' living trust; and a first-party trust holding the disabled person's own money, which must repay Medi-Cal at death. Paying for housing can reduce SSI. An ABLE account can complement it.
Why it matters for you
It lets families leave real support to a disabled child or sibling without trading away health coverage and monthly benefits.
Rules, limits and sources (2026)
Federal law at 42 U.S.C. Sec. 1396p(d)(4)(A) authorizes first-party trusts; SSA's POMS manual (section SI 01120) sets the trust rules SSA applies.
Watch out for
Trustee choices, such as paying rent versus extras, involve trade-offs; a special-needs attorney should draft the trust and guide the trustee.
Connections (2)
▸Special-needs trust is a type of Irrevocable trustStandard practice
How they connect
A special-needs trust is irrevocable so neither the beneficiary nor SSA can treat its money as theirs; the trustee alone decides payments for supplemental needs. A third-party version can sit inside parents' revocable trust and become irrevocable at their death; a first-party version must be irrevocable from the start.
When it applies
Created for disabled children, siblings or adults on benefits, or after a personal-injury settlement; drafted by special-needs attorneys.
How sure?
SSA's POMS rules count revocable trusts as the beneficiary's resources; federal law requires first-party trusts to repay Medicaid (Medi-Cal) at death.
Watch out for
Drafting must track changing SSA rules; for example, SSA stopped counting food as in-kind support in 2024, so trustee-paid groceries no longer reduce SSI.
▸Special-needs trust preserves eligibility for Supplemental Security Income (SSI)Law or rule (2026)
How they connect
SSI is needs-based: more than $2,000 in countable assets, or cash given directly, can reduce or end the check, and the Medi-Cal that comes with it. Because a properly drafted special-needs trust isn't the beneficiary's asset, it can pay for extras while SSI continues.
When it applies
Used by families of disabled children and adults on SSI; trustees must report certain payments to SSA.
The rule
SSA's POMS section SI 01120 sets trust rules; SSI's $2,000 individual asset limit has not changed since 1989.
Watch out for
Payments for rent or utilities can still cut SSI, by up to about a third; trustees weigh that trade-off case by case.