A special needs trust can keep a disabled relative's settlement or inheritance out of Medicaid's asset count, but funding one with their own money at 65 or older can draw a transfer penalty., Federal law allows two kinds of special needs trust for a disabled person's own assets. The first-party trust under 42 U.S.C. 1396p(d)(4)(A) is for a disabled person under 65, and the State is repaid first from what's left when that person dies. The pooled trust under 42 U.S.C. 1396p(d)(4)(C) is run by a nonprofit, has no age cap, and may keep what's left in the account. The Supplemental Security Income (SSI) trust-counting rule does not apply to either trust, though certain revocable versions may still count as a resource.

In This Guide

Why a Special Needs Trust Matters for Medicaid

The SSI countable-resource limit is $2,000 for an individual and $3,000 for a couple, and those limits are not adjusted for inflation. If the resources SSA counts are over the limit at the start of a month, the person can't receive SSI for that month. Only countable resources are measured: the home you live in, one vehicle used for transportation, household goods and up to $100,000 in an ABLE account are among the things SSA doesn't count.

Medicaid for people who are aged, blind or disabled borrows SSI's income and resource methods under federal rule 42 CFR 435.601, which is why a single applicant commonly faces a countable-asset limit of about $2,000. Each state sets its exact limit: the same rule lets a state use less restrictive methods, and some states have raised or eliminated the asset limit. Our guide to countable vs. exempt assets covers what is counted.

A settlement, an inheritance or savings in a disabled person's own name can put them over that limit. The two (d)(4) trusts are the federal answer. For SSI, the trust-counting rule does not apply to a first-party (d)(4)(A) trust or a pooled (d)(4)(C) trust, and the Medicaid trust-counting subsection names the same two trusts as exceptions., Two cautions: SSA says certain revocable (d)(4)(A) or (C) trusts may still count as a resource, and a qualifying trust is still checked against SSA's general resource rules.,

This guide covers trusts that hold the disabled person's own assets. A trust funded with someone else's money isn't covered here; ask an attorney how your state treats one. If the person just inherited money, our guide to what happens to SSI after an inheritance covers that situation.

Who Counts as Disabled for Either Trust

Both trusts define disability by pointing to the SSI standard at 42 U.S.C. 1382c(a)(3), so the beneficiary must meet it for the trust to qualify for the Medicaid exceptions.

  • Adults: a person is disabled if they can't engage in any substantial gainful activity because of a medically determinable physical or mental impairment that is expected to result in death or has lasted, or is expected to last, at least 12 months.
  • Children under 18: the test is a medically determinable impairment that causes marked and severe functional limitations, with the same death-or-12-months duration requirement.

For the pooled trust, SSA's policy manual adds a timing condition: the person whose assets fund the account must be disabled for SSI purposes as of the date the account's resource status could affect SSI eligibility. For more on SSI itself, see our guide to SSI for seniors.

How a First-Party Special Needs Trust Works for Medicaid

A first-party trust is the (d)(4)(A) trust: it holds the disabled person's own assets and must meet every condition in the statute and in SSA's Program Operations Manual System (POMS), at POMS SI 01120.203.

  • Age: the trust must be established for a disabled person under 65. For this rule, a person turns 65 on the anniversary of their birth.
  • Who establishes it: the individual, a parent, grandparent, legal guardian of the individual, or a court.
  • Sole benefit: SSA reads "for the benefit of" as requiring that the trust be for the individual's sole benefit. A trust that pays benefits to anyone else during the person's lifetime, or that can end before death with the money going to someone other than the State or a creditor for goods or services the person received, doesn't qualify.
  • Payback: the trust must say that at the person's death the State will receive everything left in the trust, up to the total medical assistance it paid.

The word "individual" on that list is recent. Section 5007 of the 21st Century Cures Act, enacted December 13, 2016, inserted "the individual," into (d)(4)(A); before it, a disabled adult could not establish his or her own first-party trust. The Cures Act change applies to first-party trusts established on or after December 13, 2016, and the Cures Act left the first-party trust's under-65 and payback conditions unchanged.

Turning 65 does not end a trust that was set up in time. Under POMS, a first-party (d)(4)(A) trust established before the beneficiary turned 65 continues to qualify after 65, but additions to a first-party trust after 65 do not qualify for the exception. Interest, dividends and other first-party trust earnings are not treated as additions, and annuity, support or Survivor Benefit Plan payments irrevocably assigned to a first-party trust before 65 are treated as paid before 65.

Funding a first-party trust is also covered on the transfer side. Federal law, at 42 U.S.C. 1396p(c)(2)(B)(iv), exempts from the Medicaid transfer penalty assets transferred to a trust established solely for the benefit of a disabled individual under 65.

How a Pooled Trust Works

A pooled trust is the (d)(4)(C) trust. Federal law sets these conditions:

  • A nonprofit association establishes and manages the trust.
  • Each beneficiary has a separate account, but the accounts are pooled for investment and management.
  • Accounts are established solely for the benefit of disabled individuals, by the individual, a parent, grandparent, legal guardian or a court.
  • Each account must be for the sole benefit of the disabled person, with the same lifetime and early-termination limits as a first-party trust.

SSA's policy states that there is no age restriction for the pooled-trust (d)(4)(C) exception, which settles whether the account counts as a resource; funding an account at 65 or older is a separate question, covered below.

What happens to a pooled account when the beneficiary dies is covered in What Happens to the Money at Death.

First-Party vs. Pooled Trust at a Glance

First-party trust, (d)(4)(A) Pooled trust, (d)(4)(C)
Age Beneficiary under 65 when established; keeps qualifying after 65, but additions after 65 do not qualify No age restriction in the exception
Who establishes it The individual (trusts established on or after Dec. 13, 2016), a parent, grandparent, legal guardian or court The account: the individual, a parent, grandparent, legal guardian or court
Who manages it Not specified in the (d)(4)(A) text A nonprofit association
At death State is first payee, up to total Medicaid paid; only death-related taxes and reasonable administration fees come first Trust may retain the balance; any amount not retained repays the State, up to total Medicaid paid
Medicaid transfer-penalty exception Covered: the beneficiary is under 65 Covered when the beneficiary is under 65; funding your own account at 65 or older falls outside it
SSI resource treatment SSI trust-counting rule does not apply (certain revocable trusts may still count) Same as first-party

Table sources: 42 U.S.C. 1396p(d)(4)(A), (d)(4)(C) and (c)(2)(B)(iv), POMS SI 01120.203, and 42 U.S.C. 1382b(e)(5).,,

Which Trust Fits Your Situation?

Age and whose money it is decide most of the choice.

Funding a Pooled Trust at 65 or Older

Under 42 U.S.C. 1396p(c)(2)(B)(iv), a transfer is exempt from the Medicaid transfer penalty when it goes to a trust established solely for the benefit of a disabled individual under 65. Funding a pooled sub-account for your own benefit at or after 65 falls outside the 1396p(c)(2)(B)(iv) exception, so the amount transferred can be treated as an uncompensated transfer subject to a period of ineligibility for Medicaid long-term care. SSA's pooled-trust policy puts it this way: "There is no age restriction for this exception. However, a transfer of resources into a trust for an individual age 65 or over may result in a transfer penalty".

SSI runs a parallel rule. POMS SI 01150.121 excepts a transfer to a trust for the sole benefit of a blind or disabled person under 65, including yourself. Funding your own (d)(4)(A) or (d)(4)(C) account at or after 65 is outside that exception, so the amount transferred is subject to an SSI period of ineligibility unless another exception applies.

A penalty is not automatic. Your state Medicaid agency applies the Medicaid rule under 1396p(c), and SSA applies the SSI rule; another exception may fit the facts, and the treatment should be confirmed under your state's policy before anyone funds an account. The other federal Medicaid exceptions include transfers to a spouse, a satisfactory showing that the transfer was made exclusively for a purpose other than qualifying for Medicaid, return of all the transferred assets, and an undue-hardship waiver that every state must offer. One more exception runs the other way on age: a transfer to a trust established solely for the benefit of the transferor's own blind or disabled child is excepted whatever the child's age, for Medicaid and for SSI.

If a Medicaid penalty does apply, federal law reaches back 60 months from the application, and the penalty blocks Medicaid payment only for long-term care, meaning nursing facility care, an equivalent institutional level of care, and home and community-based waiver services. The number of months is the total uncompensated value divided by the state's average monthly private-pay cost of nursing facility care, with no rounding down, and the period starts on the later of the month of the transfer or the date the person is otherwise eligible and would be receiving institutional-level care. For SSI, the period is the uncompensated value divided by the maximum monthly benefit plus any state supplement, capped at 36 months. Our guides to the Medicaid look-back period and the SSI transfer penalty work through the math.

How Trust Spending Affects SSI

The (d)(4) exceptions settle whether the trust counts as a resource. They don't settle how payments out of the trust affect the monthly SSI check. SSA's Spotlight on special needs trusts sets the SSI rules:

  • Cash: money paid from the trust directly to the beneficiary reduces their SSI benefit.
  • Shelter: money paid to someone else to provide the beneficiary with shelter also reduces SSI, but in 2026 SSA subtracts no more than $351.33 for the month, no matter how much is paid. A rent bill larger than $351.33 still costs the beneficiary at most $351.33 of that month's check.

Food changed on September 30, 2024. Under SSA's final rule, Omitting Food From In-Kind Support and Maintenance Calculations (89 FR 21199), SSA no longer counts food in in-kind support and maintenance (ISM) and counts only shelter expenses: room, rent, mortgage payments, real property taxes, heating fuel, gas, electricity, water, sewerage and garbage collection. SSA's own summary is that "the value of food will no longer reduce your SSI payment." The carve-out is for in-kind support only: if someone gives the beneficiary cash or a gift card to pay for food, SSA counts its value as unearned income.

These are SSI rules. Ask your state Medicaid agency how it treats trust distributions for Medicaid eligibility.

What Happens to the Money at Death

For a first-party trust, POMS requires the trust to list the State or States as first payee, with priority over other debts and administrative expenses. The trust must repay any State that provided Medicaid, not one named State, and the payback can't be limited to a period of time. Two expenses may be paid from a first-party trust before the State's payback: taxes owed to a State or the federal government because of the beneficiary's death, and reasonable fees for administering the trust estate. The State's claim on a first-party trust is capped at the total medical assistance it paid.

For a pooled (d)(4)(C) trust, federal law lets the trust retain what remains in the beneficiary's account. To the extent a pooled trust does not retain the remaining balance, the pooled trust repays the State up to the total medical assistance paid for the beneficiary. Because retention is allowed but not required, ask any nonprofit you are considering what its trust agreement says happens to an account when the beneficiary dies.

Estate recovery is a different provision. Under 42 U.S.C. 1396p(b), states must seek recovery from the estates of people who received Medicaid at 55 or older, at least for nursing facility services, home and community-based services, and related hospital and prescription drug services, and a state may choose to recover for more. Recovery can happen only after the death of a surviving spouse, and only when there is no surviving child under 21 or who is blind or permanently and totally disabled. Every state must also have an undue-hardship waiver. The trust payback comes from the terms (d)(4) requires inside the trust; estate recovery reaches the person's estate under subsection (b). Our guide to Medicaid estate recovery explains that process.

Where an ABLE Account Fits

An ABLE account is a separate tool that can sit alongside a trust. For SSI, up to $100,000 in an ABLE account is excluded from countable resources. If a balance above $100,000 puts the person over the resource limit, SSI cash benefits are suspended rather than terminated, and the suspension does not affect Medicaid eligibility.

Eligibility depends on when the disability began. An ABLE account may be opened by someone whose blindness or disability began before their 46th birthday; before January 1, 2026, the condition had to begin before age 26. The age-46 onset threshold applies to everyone assessed for an ABLE account on or after January 1, 2026, however long ago the disability began.

ABLE has its own payback. When an ABLE account beneficiary who participated in Medicaid dies, what's left in the ABLE account reimburses the state Medicaid agency for payments made after the account was established, but only after outstanding qualified disability expenses are paid, and net of any Medicaid Buy-In premiums. An ABLE account distribution for housing expenses counts against the SSI resource limit unless it is spent in the month it's received. Our guide to ABLE accounts in Georgia shows how one state program works.

A Miller Trust Is a Different Tool

A Miller trust, also called a qualified income trust (QIT), comes from a different subparagraph, 42 U.S.C. 1396p(d)(4)(B), and it holds income, not savings: only pension, Social Security and other income, plus income accumulated in the trust. A Miller trust also repays the State at death, and a Miller trust is the route to eligibility only in states that cover the special income level group but not nursing facility services for the medically needy. For how one income-cap state runs it, see our Tennessee qualified income trust guide.

Frequently Asked Questions

Can family members inherit what's left in a special needs trust?

From a first-party (d)(4)(A) trust, family can receive only what remains after the State is repaid, and the State's claim is capped at the total Medicaid it paid for the beneficiary. For a pooled (d)(4)(C) account, the federal statute addresses only what the trust retains and what it repays to the State; whether anything can pass to family depends on the nonprofit's trust agreement.

Can I set up my own special needs trust?

Yes, if you meet the SSI disability standard and are under 65. Since the 21st Century Cures Act, a disabled person can establish their own first-party trust, for trusts established on or after December 13, 2016. You can also establish your own account in a pooled trust at any age, though funding it at 65 or older may draw a transfer penalty.

Can a pooled trust help someone over 65 qualify for Medicaid home care?

A pooled trust can keep savings from counting as an SSI resource, but funding a pooled account for your own benefit at 65 or older falls outside the federal transfer-penalty exception. A Medicaid penalty, if your state imposes one, blocks payment for home and community-based waiver services as well as nursing facility care. Ask your state Medicaid agency how it treats these transfers before funding an account. If income rather than savings is the problem, see Medicaid home care when income is too high.

Your Next Steps

Trust language decides whether either trust qualifies: POMS requires specific payback wording, and a sole-benefit defect disqualifies the trust. Talk to an elder law or special needs planning attorney before money goes in, and bring these questions:

  1. Is the beneficiary under 65 today, and on what date do they turn 65?
  2. Does the draft name the State as first payee and limit the trust to the beneficiary's sole benefit?
  3. For a pooled trust, what does this nonprofit's agreement do with a remaining balance at death?
  4. If the beneficiary is 65 or older, how does our state Medicaid agency treat transfers into a pooled trust, and does another exception apply?

Then check your state's rules. Our state guides go deeper on Georgia special needs trusts and the New York pooled income trust. For other ways families plan around the asset limit, see Medicaid planning strategies.

Learn More

MedicaidWhat Counts as an Asset for Medicaid? Countable vs. ExemptWhat counts as an asset for Medicaid? Only countable assets face the limit. The home, one car and household goods often don't. See each asset, sorted. MedicaidMedicaid Look-Back Period: How the 5-Year Rule WorksThe Medicaid look-back period reaches 60 months back from your application. Here's how a gift delays nursing home coverage, the exemptions, and state rules. MedicaidWill Medicaid Take Your House? Medicaid Estate Recovery ExplainedMedicaid estate recovery explained: federal law, 51-state matrix, categorical protections, hardship waivers, and 2025-2026 reform updates. Verify before acting. FinancialSSI Transfer Penalty: Gifts Can Cost Up to 36 MonthsGive a resource away and SSI can shut you out for up to 36 months. The SSI transfer penalty is its own federal rule, not Medicaid's 60-month look-back. FinancialWhat Happens to Your SSI If You Inherit MoneyAn inheritance doesn't count against SSI's $2,000 individual limit on arrival. It counts from the first moment of the next month, and that gap is your window. MedicaidGeorgia Special Needs Trusts and MedicaidCompare Georgia first-party (d4A), pooled (d4C), and third-party special needs trusts plus ABLE accounts, with the 2024 SSI food rule and 2026 limits.

Chat with Brevy's care navigator about special needs trusts and Medicaid eligibility at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.

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