Using Special Needs Trusts for SSI Eligibility

Individuals with disabilities can qualify for SSI benefits if they have some assets in an SSI trust, but only if the trust assets are spent in limited ways.

By , J.D. · University of Baltimore School of Law

Supplemental Security Income (SSI) is a federal program providing benefits to those over 65, blind, or disabled. But you can only receive SSI if you meet the Social Security Administration's (SSA) strict income and asset limits. These financial limits can be a particular problem if you're receiving or applying for SSI disability and you experience a financial windfall.

Getting a large amount of cash, like an inheritance or a lawsuit settlement, could end your eligibility for SSI disability benefits. But if these assets are placed in a special needs trust, it can help preserve your eligibility for SSI while allowing some improvements to your lifestyle.

Let's first look at the SSI limits for income and assets (or "resources," as Social Security calls them), and then we'll discuss how SSI trusts ("special needs trusts") can be used to protect your benefits.

SSI Income and Resource Limits

The SSI monthly income limit is the amount of the federal benefit rate (FBR) plus your state's supplementary SSI payment (if your state has one). For 2024, the FBR is $943 for individuals ($1,415 for married couples). If your countable income is more than the FBR plus your state supplement, you won't be eligible for SSI.

Not All Income Counts for SSI

The good news is that Social Security doesn't count all income toward SSI eligibility, including more than half the money you earn from working. Learn more about what income counts for SSI eligibility.

SSI Resource Limits

To be eligible for SSI, you can have no more than $2,000 in assets ($3,000 for married couples). Assets include cash, bank accounts, real estate (other than your primary residence), and investments. But Social Security won't count the home you live in and one car in determining eligibility. Learn more about which assets can affect your SSI eligibility.

Does a Special Needs Trust Affect SSI?

A trust is a legal arrangement that allows for a trustee to manage money (or other assets like stocks and bonds) on behalf of someone else. Social Security will usually count the assets in a trust toward SSI eligibility.

All the assets in a revocable trust would be counted as resources for SSI purposes because you can end the trust and access the assets at any time. Even with an irrevocable trust, Social Security would count (as a resource available to you) any portion of the trust that could be used to make payments to you.

Fortunately, Social Security lets you set up special needs trusts (SNTs), also known as "supplemental needs trusts," which provide exceptions to these general rules. There are three general types of special needs trusts that can protect disabled beneficiaries.

The Third-Party Special Needs Trust

A "third-party special needs trust" is funded by assets owned by someone other than the disabled person. Third-party trusts are often created in a parent's will to ensure that a disabled child's needs are met after the parent dies. State legislation sometimes contains language that can be used to establish the trust.

For the assets in a third-party trust to not count toward SSI eligibility, the trust must be established for the "sole benefit" of the disabled person. (Social Security Act §1917(d)(4)(A).)

Learn about the difference between third-party and first-party special needs trusts.

The First-Party Special Needs Trust

A special needs trust that's established with the disabled person's own assets (for example, the proceeds from a medical malpractice claim) is called a "first-party special needs trust." This type of trust is also sometimes referred to as a:

  • self-settled trust
  • self-funded trust, or
  • grantor trust.

In a self-settled special needs trust for SSI, any proceeds that remain in the trust when the person dies must go to reimburse the state for Medicaid costs spent on behalf of the disabled person.

Additionally, the disabled person must be under the age of 65, and the trust must be established by the person's parent, grandparent, or by the court. (Social Security Act §1917(d)(4)(A).)

First-party trusts are often used for inheritances from parents (when the parents haven't arranged for a third-party trust), because receiving an inheritance can cause an SSI recipient to lose their benefits. A first-party trust can also be used to hold a personal injury settlement, whether it's a lump sum or an annuity, which gets paid out over some years.

The Pooled Asset Trust

A pooled asset trust contains the resources belonging to a disabled person, but it's established and managed by a nonprofit organization. These organizations manage the assets of more than one person, and the company "pools" all the participants' funds into one trust that it then manages and invests. But an individual's funds in the trust can only be spent on that person's behalf.

Like self-settled trusts, a pooled asset trust must be created for the sole benefit of the disabled person by a parent, grandparent, legal guardian, or the court. Also, like a self-settled trust, if the disabled person dies, any remaining resources in that person's account might have to be used to repay the state for Medicaid costs related to the individual's care. (Social Security Act § 1917(d)(4)(C).)

Choosing a Trustee for a Special Needs Trust

The trustee is the person selected to manage and spend the funds in the trust. A trustee should be someone who will only act in the best interest of the disabled person. Often third-party special needs trusts are part of the estate planning process, and the trustee is named in the will that established the trust.

A Trust Created for the Sole Benefit of the Disabled Person

To qualify as a special needs trust or SSI trust, the trust must have been created for the sole benefit of the disabled person—meaning there can't be any other beneficiary named in the trust instrument. You also can't create the trust to benefit yourself (for example, to dispose of excess assets).

How the Money From the Trust Can Be Used

Money from a special needs trust shouldn't be paid directly to the SSI recipient because Social Security counts funds paid to the person as income for that month. The extra income would cause the SSA to reduce or even eliminate the person's monthly SSI benefit.

Also, if the funds in a special needs trust are used to buy basic necessities like food or shelter, Social Security will consider the money used for these purchases as "in-kind" support and maintenance (ISM). When you get in-kind support, Social Security will reduce your SSI benefit by up to one-third (but no more). The maximum reduction in 2024 is $334.33 per month, regardless of how much the trust pays for food or shelter.

It sometimes makes sense for a family to pay a disabled person's rent with funds in an SSI trust despite the one-third reduction in SSI, but often it doesn't. If you're considering paying a disabled person's living expenses with trust funds, you might want to check with a trusts and estates attorney before using the funds to pay rent to see if it makes sense financially.

Money from the trust can be used to purchase assets for the SSI recipient that don't count as resources, such as clothing, as long as money isn't given directly to the SSI recipient. Money from the trust can also be used to directly pay for things like:

  • medical care
  • physical therapy
  • a phone and a phone plan
  • a computer
  • entertainment
  • education, and
  • travel.

If money from the trust is used to buy an asset for the recipient that isn't excluded—like a second car—it could put the disabled person over the SSI resource limit.

Note that payments from an SSI trust can affect Medicaid eligibility differently. Medicaid trusts have different eligibility rules.

An Alternative to Special Needs Trusts

The Achieving a Better Life Experience (ABLE) Act allows for the creation of "ABLE savings accounts," special bank accounts for those with disabilities. Money in an ABLE account—up to $100,000—doesn't count as an asset or resource for SSI disability benefit purposes.

Unlike a trust, an ABLE account has no trustee, and the money in the account can be spent as the disabled person wishes. But ABLE bank accounts are currently only available to those who became disabled before age 26. In 2026, they will be available to people who became disabled before age 46. For more information, see our article on ABLE accounts.

Setting Up an SSI Trust

Special needs trusts, whether third-party, self-settled, or pooled, can be great tools for protecting a disabled person's access to means-tested benefits like SSI. But a trust that's not created correctly can cause an SSI recipient or applicant to exceed the SSI resource limit (except when counting the trust as a resource would lead to "undue hardship" for the disabled person).

Consider contacting an attorney specializing in estate planning for information about creating a special-needs trust for SSI eligibility purposes.

Updated February 26, 2024

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