Leaving Money to a Child on Benefits

What’s inside the guide

• How an outright inheritance can interrupt or end SSI and Medi-Cal for a loved one who depends on them
• What a special needs trust is built to do, and how it lets the trust hold money without the money counting against your loved one
• Why the trust has to exist and be named as the recipient before the inheritance moves, not after
• How a special needs trust fits with the rest of your estate plan, including who else is named to receive assets
• What to look for when choosing a trustee for the trust

Will my child lose SSI or Medi-Cal if I leave them money directly?

Possibly, yes. Both programs are means-tested, so eligibility depends on what the recipient owns, not just what they earn. Money or property left directly to a beneficiary on SSI or Medi-Cal counts as their own resource the moment they receive it, and that can push them over the line and suspend the benefit until the excess is spent down. A special needs trust exists specifically to hold the inheritance instead of handing it to the beneficiary outright.

What does a special needs trust actually do?

It lets someone else, the trustee, hold and manage money for your loved one’s benefit without that money being treated as theirs for eligibility purposes. The trustee pays for things that supplement, rather than duplicate, what the benefit programs already cover, and the beneficiary cannot demand a distribution on their own. That separation between ownership and benefit is what keeps the assets from counting against them.

When does the trust need to be in place?

Before the money changes hands. A special needs trust has to be named as the recipient in your will or living trust, or funded directly during your lifetime, so an inheritance flows into the trust rather than into your loved one’s own name. Naming your loved one directly on an account or in a will, even with good intentions, undoes the protection after the fact and there is no clean way to fix it once the funds have already landed in their name.

If your current estate plan leaves assets outright to a family member who relies on benefits, it is worth a second look before anything changes hands. See our estate planning page for how a special needs trust fits into the rest of your plan.