What trusts do to your SSI and Medicaid

A trust can disqualify you from SSI or reduce your Medicaid coverage, depending on what kind of trust it is and who controls the money inside it. SSI counts most trust funds as your "resources" — money you own — and SSI has a $2,000 resource limit for individuals and $3,000 for couples. If a trust puts you over that limit, you lose SSI that month. Medicaid's rules vary by state, but many states also count trust money as a resource and use similar limits.

The key difference is who has access to the money. If you can take money out of the trust whenever you want, SSI treats it as yours and counts it fully. If a trustee controls the money and can choose whether to give it to you, SSI may count only the money the trustee actually gives you, or may count nothing at all. Some trusts are designed specifically to hold money without triggering SSI or Medicaid loss — these are called special needs trusts or supplemental needs trusts — but only if they meet strict legal requirements.

Key Takeaways

  • SSI counts most trust money as a resource and will reduce or stop your benefits if the trust balance exceeds $2,000 (individual) or $3,000 (couple).
  • A trust that lets you withdraw money anytime counts as your money in full; a trust where a trustee controls distributions may count differently or not at all.
  • Special needs trusts and supplemental needs trusts are designed to hold money without affecting SSI or Medicaid, but only if they follow specific legal rules.
  • Medicaid's treatment of trusts varies by state, and some states count trust distributions as income in the month received, which can also reduce benefits.
  • You must tell SSI about any trust you have or receive money from; hiding a trust can result in overpayment that you will have to repay.

Revocable trusts and SSI

A revocable trust is one you can change or cancel at any time. SSI treats a revocable trust as money you own, because you have the power to take it back. The entire balance counts as a resource, and if it exceeds $2,000, you will lose SSI benefits until the balance drops below the limit.

This applies even if you have named someone else as trustee and even if you rarely touch the money. What matters to SSI is that you could take it. If you receive distributions from a revocable trust — money the trustee pays to you — that money also counts as income in the month you receive it, which can reduce your SSI payment that month.

Irrevocable trusts and SSI

An irrevocable trust is one you cannot change or cancel. SSI's treatment depends on whether you can force the trustee to give you money. If the trust document says the trustee must give you money at certain times or on request, SSI counts the entire trust balance as a resource. If the trustee has discretion — meaning they can choose whether to give you money — SSI counts only the money they actually distribute to you, and only in the month you receive it.

If the trustee never gives you anything, SSI counts nothing. This is why some families create irrevocable trusts with a trustee who has full discretion: the trust can hold money for your future needs without affecting your current SSI. However, the trustee must be willing to say no to you, and the trust document must be written carefully to avoid language that requires distributions.

Special needs trusts and supplemental needs trusts

A special needs trust (also called a supplemental needs trust) is an irrevocable trust designed specifically to hold money for someone on SSI or Medicaid without causing benefit loss. The trustee has discretion and is instructed to pay for things SSI does not cover — therapy, education, equipment, transportation, recreation — rather than basic living expenses like food and rent.

For this to work, the trust must meet strict requirements: it must be irrevocable, the trustee must have discretion, and the trustee must not be required to use trust money for things SSI already pays for. If the trust is written correctly, SSI ignores it entirely — the balance does not count as a resource, and distributions do not count as income. The money can grow and be used for years without affecting benefits.

The catch is that the trust must be created and funded before you receive the money, and it must be drafted by someone who understands SSI rules. A poorly written trust can fail this protection. Also, if the trust is created with money that came from you (for example, your own inheritance), SSI may treat it differently than if it was created with someone else's money.

How Medicaid treats trusts

Medicaid's rules on trusts vary significantly by state. Some states use the same resource limits as SSI ($2,000 individual, $3,000 couple) and count trust balances the same way. Other states have different limits or different rules about what counts as a resource.

Many states also count trust distributions as income in the month received, separate from the resource count. This means you could receive a distribution, have it count as income, and lose Medicaid coverage that month even if the trust balance itself is under the limit. Some states have "income cap" rules that disqualify you if your monthly income exceeds a certain amount, usually around $1,000 to $1,500.

Because state rules differ, you must contact your state Medicaid office or your local Medicaid caseworker to learn how trusts are treated where you live. A trust that protects SSI may not protect Medicaid, or vice versa.

Reporting a trust to SSI and Medicaid

You are required to report any trust to SSI within 10 days of learning about it or receiving money from it. This includes trusts created by family members, trusts you inherit, and trusts you create yourself. You must provide SSI with a copy of the trust document so they can determine how to count it.

If you receive a distribution from a trust, you must report it as income. If you fail to report a trust or a distribution, SSI will eventually discover it through bank records or other means, and you will owe back any benefits you received while ineligible. This overpayment can be large and is difficult to appeal.

Contact your SSI caseworker or call the SSI office in your area to report. Have the trust document ready. If you do not know how to describe the trust, bring the document itself and ask the caseworker to help you explain it.

Trusts created for you by someone else

If a parent, grandparent, or other family member creates a trust and names you as a beneficiary, the rules depend on the type of trust and whether you have any control over it. A trust created by someone else that you cannot change is treated as an irrevocable trust, and SSI applies the discretion test: if the trustee must give you money, the balance counts as a resource; if the trustee has discretion, only distributions count.

If the trust was created specifically as a special needs trust — meaning it was drafted with SSI rules in mind and names a trustee with discretion — it should not affect your benefits. However, you still must report it to SSI and provide a copy of the trust document. Do not assume the person who created it understood SSI rules correctly.

Frequently Asked Questions

If my parent puts money in a trust for me, will I lose SSI?

It depends on the type of trust and whether the trustee must give you the money or has discretion. If the trustee can choose whether to distribute money to you, and the trust document does not require distributions, SSI should not count the trust balance. Ask your parent to have the trust reviewed by an attorney who knows SSI rules, or report the trust to SSI and ask them to determine how it affects your benefits.

Can I create my own special needs trust?

No. A special needs trust must be created by someone else — typically a parent, grandparent, or other family member — and you cannot be the trustee. If you create a trust for yourself, it is revocable and SSI counts the entire balance as your resource. You can fund a trust or ask someone to create one for you, but you cannot be the person who sets it up.

What happens if I inherit money and put it in a trust?

If you inherit money and then create a trust with it, SSI may treat the trust as revocable (because you created it) and count the balance as your resource. If you want to protect inherited money, you should ask a family member or attorney to create a special needs trust before you receive the inheritance, or immediately after, with someone else as trustee.

Does a trust affect my Medicaid the same way it affects SSI?

Not always. Medicaid rules on trusts vary by state, and some states count trust distributions as income in ways SSI does not. Contact your state Medicaid office or your caseworker to learn how trusts are treated in your state. A trust that protects SSI may reduce or eliminate Medicaid coverage.

What if the trustee refuses to tell me what is in the trust?

You have the right to information about a trust that names you as a beneficiary. Ask the trustee in writing for a copy of the trust document and a statement of the account balance. If the trustee refuses, you may need to consult an attorney. In the meantime, report to SSI that you are a beneficiary of a trust but do not yet have the document, and provide it as soon as you receive it.