Ask about a special needs trust before the money lands

Someone has left you money. If you live on SSI, or on Medicaid that you get because of a disability, that news can arrive with a threat inside it: the help that pays for your care comes with a savings limit, and an inheritance can go straight over it in a single month.

If you get SSI or disability-based Medicaid, talk to a lawyer who knows disability benefits before you accept or refuse an inheritance: a special needs trust can let you keep both the money and your benefits.

Why good news can cost you

SSI lets you keep very little. Social Security’s rules put the limit at $2,000 in savings for one person and $3,000 for a couple, a figure that has not changed since 1989. An inheritance counts as income in the first month you can use it, and whatever is left counts towards that limit after. Medicaid depends on how you qualify: federal rules set no savings limit for some Medicaid groups, but people who get Medicaid through SSI, because of a disability, or because of age can still face one, and one person puts it at around $2,000; the figure can differ by state.

The arithmetic that follows is what makes this frightening, and some people spell it out. For a person with a serious disability, the care those benefits cover — treatments, medicines, a place to live — can cost more in a year than a large inheritance, so money that sounds life-changing could be gone within a year or two, and the cover with it. Getting back onto benefits afterwards is not quick: some people say re-applying can take months or years and may end in a refusal, and one describes housing waiting lists measured in years. Some people call it a system that keeps disabled people poor, and one person recalls the historian Paul Longmore, who burned his own book in protest because the royalties threatened the disability support that kept him alive. You are not imagining the trap.

The two obvious moves, and the one that works

The first obvious move is to refuse the money. In one conversation, some people argued that refusing was the rational choice, because the benefits are worth more than the cash. The trouble is what the rules say about it. Social Security treats refusing an inheritance as giving away something you were entitled to, which can stop SSI for up to 36 months. One person makes the same point about Medicaid: you cannot simply turn the money down to stay under the limit. So refusing is not the safe choice it looks like. How to turn an inheritance down so that it holds up legally is not covered here.

The second is to take it and carry on. Then you are over the limit, benefits stop, and you live on the money until you are under the limit again. One person describes that gap as a couple of years without the safety net before coming back; another warns that anyone who already has medical debts or liens against them may see creditors take the inheritance as soon as it arrives.

The move that works, some people say, is a trust, and one exchange’s own summary of the argument is that the side wanting to refuse was assuming no legal help was available. A special needs trust holds the money for you, and pays for things you need, without counting as your savings. There are two kinds, and the difference matters for timing.

• A trust set up by the person leaving the money, in their will or their own trust, keeps the inheritance out of your name from the start. One person says a trust likely had to be arranged before the person died. That is true of this kind, and not of the next.
• A trust set up with your own money can be set up after a death. Social Security’s rules say you, a parent, a grandparent, a guardian or a court can set one up if you are under 65. If you are 65 or older, this kind is closed to you; the same rules allow a pooled trust, run by a nonprofit, at any age, though putting money into one at 65 or older may be treated as giving it away. That is a question for the lawyer. The catch is that when you die, whatever is left pays back the state for the Medicaid care you received.

An ABLE account is a smaller tool that some accounts pair with a trust. Since January 2026 it is open to people whose disability began before age 46 (it used to be 26); Social Security ignores the first $100,000 in it for SSI, and in 2026 no more than $20,000 a year can be paid in.

None of this is do-it-yourself. Some people say complicated benefit or tax questions need a professional rather than the internet, and people warn that setting up these trusts needs a specialist, costs real money in legal fees, and is best done before the inheritance reaches you. What it costs, and exactly how a trust interacts with each benefit, are not covered here. If you cannot pay a lawyer, legal aid is free and usually based on income; the listing below finds it in the United States.

If you are the one leaving the money

If you are writing a will and someone you love lives on disability benefits, this is the moment that matters. The protection is yours to give, with a lawyer who does this kind of planning: a share left to a special needs trust, rather than to them directly, stays out of their name, so the choice above does not reach them. There is a page on this site about writing the will itself.

Who this page is not for

If what you inherited is a debt — a letter saying you owe Social Security for money paid while you were a child — that is a different problem with its own rules, and this page does not cover it. Read the letter today, because it sets the deadlines, and contact legal aid. If the money comes from a parent who hurt you and the real question is whether to take it at all, that question is not answered here, though the tax and benefit facts on this page still apply to the money. And if you live outside the United States, none of the benefit rules on this page are yours.