What trusts do to your SSI and Medicaid

A trust can disqualify you from SSI or reduce your Medicaid coverage, but only certain kinds of trusts do this. The rule depends on whether you control the trust money and whether it was set up for you specifically. A revocable trust — one you can change or take money from at any time — counts as a resource you own, and SSI will count it toward your resource limit. An irrevocable trust — one you cannot change or access — may not count against you at all, depending on how it was written and who controls it.

The reason trusts matter is that SSI has a strict resource limit: $2,000 for an individual and $3,000 for a couple. If your countable resources go over that limit, you lose SSI entirely. Medicaid resource limits vary by state but work the same way. A trust that is written correctly can keep money out of that count, which means you keep your benefits. A trust that is written wrong can push you over the limit and cost you coverage.

Key Takeaways

  • Revocable trusts count as resources you own and can disqualify you from SSI if the total goes over $2,000.
  • Irrevocable trusts may not count against your resource limit if they are set up correctly and you cannot access the money.
  • A self-settled trust — one you fund with your own money — is treated differently than a trust someone else funds for you.
  • The exact rules depend on state law for Medicaid and on how the trust document is written, so you need to show your trust to a lawyer or your benefits office before assuming it is safe.

Revocable trusts and why SSI counts them

A revocable trust is one you created and can change, amend, or revoke at any time. You can also take money out of it whenever you want. Because you have this power, SSI treats the entire trust as a resource you own. If the trust holds $5,000 and your resource limit is $2,000, SSI will count all $5,000 and you will lose your SSI check.

This applies even if you have not actually taken the money out. SSI looks at what you could do, not what you have done. The same rule applies to Medicaid in most states. If you are receiving SSI or Medicaid and you are thinking about putting money into a revocable trust, you should talk to your benefits office or a lawyer first, because it will almost certainly affect your benefits.

Irrevocable trusts and when they do not count

An irrevocable trust is one you cannot change, amend, or revoke once it is signed. You also cannot take money out of it. Because you have no control over the money, SSI does not count it as a resource you own — if the trust is set up correctly. The key is that the trustee (the person who controls the money) must have full discretion to decide whether to give you any money, and the trust must not say that the trustee must give you money.

If an irrevocable trust says the trustee shall pay you $500 a month, SSI will count that $500 as income you receive each month, and it will reduce your SSI check. If the trust says the trustee may pay you money if you need it, and the trustee chooses not to, then SSI counts nothing. The difference between "shall" and "may" is the difference between losing benefits and keeping them.

Self-settled trusts and the special Medicaid rules

A self-settled trust is a trust you fund with your own money. These are treated harshly by Medicaid in most states. Even if the trust is irrevocable, Medicaid will count the entire trust as a resource you own if you set it up yourself. This is true even if you cannot access the money and even if the trustee has full discretion.

The exception is a pooled trust or a special needs trust set up under specific Medicaid rules. These are irrevocable trusts that are written in a way that Medicaid recognizes as not countable. A pooled trust is managed by a nonprofit organization, and a special needs trust is usually set up by a parent or guardian for a disabled child. If you are thinking about putting your own money into a trust to protect your Medicaid, you must use one of these two structures, or Medicaid will count the money and you will lose coverage.

Trusts funded by someone else and what SSI counts

If someone else — a parent, grandparent, or friend — funds a trust for you, the rules are different. SSI will not count the trust as a resource you own, because you did not fund it and you do not control it. However, SSI will count any money the trustee actually gives you as income in the month you receive it. If the trustee gives you $500 in January, your SSI check for January will be reduced by $500 (after a small income exclusion).

Medicaid rules for third-party trusts vary by state. Some states count the trust as a resource; others do not. You need to check with your state Medicaid office to know how your specific trust will be treated. The trust document matters too — if it says the trustee must give you money, Medicaid may count it differently than if the trustee has discretion.

What to do if you already have a trust

If you have a trust and you receive SSI or Medicaid, you should show the trust document to your benefits office before you assume it is safe. Bring the actual trust agreement, not a summary. The caseworker will read it and tell you whether it counts as a resource or income. If it does count and it is costing you benefits, you may be able to change the trust if it is revocable, or you may need to explore other options with a lawyer.

If you do not have a trust yet but you are thinking about setting one up to protect your benefits, do not do it without talking to a lawyer first. A trust that is written the wrong way can cost you thousands of dollars in lost benefits. A lawyer who knows SSI and Medicaid rules can write a trust that does what you want and keeps your benefits intact.

How income from a trust differs from the trust itself

It is important to understand the difference between the trust as a resource and the money the trust gives you as income. SSI counts both, but they work differently. If you have a $10,000 irrevocable trust that is not countable as a resource, but the trustee gives you $500 a month, then the $10,000 does not affect your SSI, but the $500 each month does. Your SSI check will be reduced by roughly $400 (after the income exclusion), every month you receive the $500.

Medicaid works similarly in most states. The trust itself may not count, but the income from it does. If you are on Medicaid and you receive income from a trust, you need to report it to your Medicaid office. Failing to report it can result in overpayment, which means you will owe the money back later.

Frequently Asked Questions

Can I put my own money into an irrevocable trust to protect my SSI?

No. SSI will count a self-settled irrevocable trust as a resource you own, even though you cannot access it. The only exception is a pooled trust or special needs trust set up under specific Medicaid rules. If you want to protect money and keep your SSI, you need to use one of those two structures, not a regular irrevocable trust.

What happens if my parent set up a trust for me before I got SSI?

SSI will not count the trust itself as a resource you own, because your parent funded it, not you. However, SSI will count any money the trustee gives you as income in the month you receive it. Your SSI check will be reduced by that amount. You should tell your SSI caseworker about the trust so they can explain how much your check will be reduced.

If I have a revocable trust and I lose my SSI, can I make it irrevocable to get my benefits back?

Making a revocable trust irrevocable is treated as giving away money by SSI and Medicaid. There is a penalty period during which you will not be able to get benefits, even if the trust is now irrevocable. You should talk to a lawyer before making any changes to a trust if you receive benefits.

Does my state Medicaid office use the same rules as SSI?

No. Medicaid rules for trusts vary by state and are often stricter than SSI rules. Some states count irrevocable trusts as resources; others do not. You need to ask your state Medicaid office directly how your trust will be treated, because the answer depends on your state's rules.

Can a trustee refuse to give me money if I need it?

Yes, if the trust says the trustee may give you money but does not have to. That is the whole point of a discretionary trust — the trustee decides. If the trust says the trustee shall give you money, then the trustee cannot refuse. The language in the trust document controls what the trustee can and cannot do.