# How to Keep SSI and Medi-Cal After a Personal Injury Settlement in California

> How to keep SSI and Medi-Cal after a California personal injury settlement: special needs trusts, pooled trusts, ABLE accounts, and lien repayment.

Source: https://ridleylawoffices.com/keep-government-benefits-personal-injury-settlement-california/
Published: 2026-09-30
Author: Estate Planning Attorney Eric Ridley

A personal injury settlement can end SSI and Medi-Cal eligibility within weeks. SSI counts a settlement as income in the month it arrives and as a resource on the first day of the next month, and the resource limit for one person is $2,000. What protects benefits is where the money goes before that deadline: a first-party special needs trust, a pooled trust account, an ABLE account, or spending on resources the programs don’t count. SSDI and Medicare work differently. Neither one reduces benefits because you have savings, but Medicare still has to be repaid for injury-related care it covered.

This article covers California law and the federal rules that apply here, current as of September 2026. It’s general information, not advice about your own case. The timing rules below are strict enough that you should have a plan before the settlement check is written, not after it clears.

## Which benefits a settlement puts at risk

The first question is which programs the injured person receives, because they don’t all test for money in the bank.

| Program | Looks at savings? | What a settlement does |
| --- | --- | --- |
| SSI (in California, SSI/SSP) | Yes: $2,000 individual, $3,000 couple | Income in the month received, then a resource. Can end eligibility. |
| Medi-Cal through SSI | Follows SSI | Losing SSI can mean losing this route to Medi-Cal. |
| Non-MAGI Medi-Cal (age, blindness, disability, long-term care) | Yes: $130,000 individual in 2026 | Counts against the asset limit if kept. |
| MAGI Medi-Cal (most adults under 65) | No asset test | Income rules still apply. |
| SSDI | No | Savings and unearned income don’t reduce it. Workers’ comp and some public disability benefits can. |
| Medicare | No asset test for eligibility | Must be repaid for injury-related care it paid for. |

The SSI figures come from [20 C.F.R. § 416.1205](https://www.law.cornell.edu/cfr/text/20/416.1205). The 2026 maximum federal SSI payment is $994 a month for an individual, according to [SSA’s 2026 figures](https://www.ssa.gov/oact/cola/SSI.html). In California, an SSI/SSP approval carries Medi-Cal with it. DHCS’s approval notice (form MC 19) tells recipients they’re eligible for Medi-Cal because SSI/SSP was approved.

The Medi-Cal asset limit comes from Welf. & Inst. Code, § 14005.62, which reinstated an asset test on January 1, 2026 for Medi-Cal groups not determined under MAGI rules. It disregards $130,000 in nonexempt property for one person and $65,000 for each additional household member. Legislation passed in 2026 schedules a drop to $21,000 for an individual and $31,000 for a couple no sooner than July 1, 2027. The details, including the conditions on that change, are on the [Medi-Cal asset limit page](https://ridleylawoffices.com/medi-cal-asset-limit-california/). A settlement that fits under $130,000 today may not fit under $21,000 next year, so plan for the lower number.

SSDI is different. SSA’s disability overview, the [Red Book](https://www.ssa.gov/redbook/eng/overview-disability.htm), says other unearned income and resources don’t affect the SSDI payment. Medicare eligibility turns on age 65, disability, or end-stage renal disease, with no asset test (higher-income beneficiaries can pay higher premiums, but that doesn’t affect eligibility).

## What happens the month the money arrives

SSI’s timing rule is the one that catches people. Under [20 C.F.R. § 416.1207(d)](https://www.law.cornell.edu/cfr/text/20/416.1207), money received is counted first as income, and if it’s still there at the first moment of the following month, it’s counted as a resource. SSA’s operations manual applies that directly to injury awards. [POMS SI 00830.515](https://secure.ssa.gov/poms.nsf/lnx/0500830515) says a settlement is countable unearned income when received and a resource beginning the month after.

Two parts of that rule help. First, SSA may subtract medical, legal, and other essential expenses connected with the accident before counting the payment (POMS SI 00830.515), so attorney fees and case costs paid out of the gross settlement generally aren’t counted as the client’s income. Second, a settlement paid directly into a special needs trust or pooled trust account that isn’t a countable resource isn’t counted at all. The same POMS section says so, and gives the example of settlement payments that are “not income when deposited into the trust accounts.”

That second point is why the trust should exist before the settlement is paid out. Money that reaches the injured person’s own bank account has already been received as income for that month, even if it moves to a trust a week later. Moving it into a qualifying trust within the month can still protect eligibility for later months (see the transfer rules below), but a direct payment to the trust is cleaner.

Whatever happens, report it. [20 C.F.R. § 416.714](https://www.law.cornell.edu/cfr/text/20/416.714) treats an SSI report as late if it’s not made within 10 days after the close of the month the change happened, and § 416.708 requires reporting resources received or given up.

## Option 1: A first-party special needs trust

For most settlements of any size, this is the main tool. A first-party special needs trust (also called a self-settled trust or a (d)(4)(A) trust) holds the injured person’s own money for their benefit without that money counting for SSI or Medi-Cal. Background on how these trusts work is in the [California special needs trust guide](https://ridleylawoffices.com/special-needs-trust-guide-california-2026/). This section covers what matters for a settlement.

The federal requirements are in [42 U.S.C. § 1396p(d)(4)(A)](https://www.law.cornell.edu/uscode/text/42/1396p):

- The trust holds the assets of an individual who is under 65 and disabled.
- It’s established for that person’s benefit by the individual, a parent, grandparent, legal guardian, or a court. The individual’s own right to set it up was added by § 5007 of the 21st Century Cures Act, as SSA notes in [POMS SI 01120.203](https://secure.ssa.gov/poms.nsf/lnx/0501120203).
- When the beneficiary dies, the state is repaid from whatever remains, up to the total medical assistance it paid.

SSA also requires that the trust be for the beneficiary’s sole benefit, meaning it benefits no one else “at any time for the remainder of the individual’s life” ([POMS SI 01120.201](https://secure.ssa.gov/poms.nsf/lnx/0501120201)). On the SSI side, [42 U.S.C. § 1382b(e)(5)](https://www.law.cornell.edu/uscode/text/42/1382b) excludes these trusts from SSI’s trust-counting rules. California’s Medi-Cal regulation, [22 C.C.R. § 50489.9](https://www.law.cornell.edu/regulations/california/22-CCR-50489.9), recognizes the same kind of trust and imposes the same payback.

**Structured settlements.** Periodic payments can go to the trust, but SSA counts an assigned payment as the beneficiary’s income unless the assignment is irrevocable ([POMS SI 01120.200](https://secure.ssa.gov/poms.nsf/lnx/0501120200), G.1.d). Make the annuity payable to the trust, irrevocably, in the settlement documents.

**How the trustee spends it.** Cash paid directly to the beneficiary is unearned income and reduces SSI (POMS SI 01120.200, E.1.a). Payments to third parties for shelter count as in-kind support and maintenance, which reduces SSI up to a capped amount. Food no longer counts. Since late 2024, [20 C.F.R. § 416.1102](https://www.law.cornell.edu/cfr/text/20/416.1102) excludes food from in-kind support and maintenance, although some older POMS sections haven’t been updated to match. Payments for medical care, therapy, equipment, education, transportation, and personal items don’t reduce SSI. The trustee’s side of this is covered in [special needs trust administration](https://ridleylawoffices.com/special-needs-trust-administration-california/).

**The cost.** The payback is real. When the beneficiary dies, Medi-Cal is repaid from the trust before anyone else receives anything. For a court-created trust, [Prob. Code, § 3605](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=PROB&sectionNum=3605) makes the state’s claim a preferred claim paid before any other distribution. That payback is separate from Medi-Cal estate recovery, which since 2017 reaches only the probate estate ([Welf. & Inst. Code, § 14009.5](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=WIC&sectionNum=14009.5)). A special needs trust avoids probate, but it doesn’t avoid its own payback clause. More on estate recovery is on the [Medi-Cal estate recovery page](https://ridleylawoffices.com/medi-cal-estate-recovery-ab-116-2026/).

## Option 2: A pooled trust account

A pooled trust is run by a nonprofit that keeps a separate account for each beneficiary and pools the money for investment ([42 U.S.C. § 1396p(d)(4)(C)](https://www.law.cornell.edu/uscode/text/42/1396p)). When the beneficiary dies, the nonprofit can keep some or all of what’s left, and the state is paid from anything the trust doesn’t keep.

Pooled trusts suit smaller settlements, where the cost of drafting and administering a stand-alone trust doesn’t make sense, and situations where no family member can serve as trustee. They’re also the usual answer for people 65 and older, because the (d)(4)(A) trust requires the beneficiary to be under 65. There’s a catch at that age. SSA says the pooled trust exception has no age limit, but a transfer into the trust by someone 65 or older may trigger an SSI transfer penalty ([POMS SI 01120.203](https://secure.ssa.gov/poms.nsf/lnx/0501120203), D.1, Note 1). Anyone 65 or older with a settlement needs individual advice before funding a pooled account.

## Option 3: An ABLE account

ABLE accounts (in California, [CalABLE](https://www.treasurer.ca.gov/able/)) are tax-advantaged accounts the disabled person can control directly. Three changes make them more useful for settlements than they used to be:

- **Age of onset is now 46.** Under [26 U.S.C. § 529A(e)(1)](https://www.law.cornell.edu/uscode/text/26/529A), the disability must have begun before age 46. Before January 1, 2026 the cutoff was 26 ([POMS SI 01130.740](https://secure.ssa.gov/poms.nsf/lnx/0501130740)).
- **SSI ignores the first $100,000.** SSA excludes up to $100,000 of an ABLE balance from resources (POMS SI 01130.740).
- **The annual contribution limit is $19,000 for 2026.** The limit is tied to the federal gift tax exclusion (§ 529A(b)(2)(B)), which the IRS set at $19,000 for 2026.

The contribution cap is the limit for settlements. A $19,000-a-year account can’t absorb a $300,000 recovery, but it pairs well with a special needs trust. The trust can fund the ABLE account each year, and the beneficiary gets money they control for day-to-day spending. One detail: an ABLE distribution for housing, or for an expense that isn’t a qualified disability expense, counts as a resource if the beneficiary still has it the month after (POMS SI 01130.740). ABLE accounts also carry a Medicaid payback at death under § 529A(f).

## Option 4: Spending on things SSI doesn’t count

For a modest settlement, the simplest approach can be buying things SSI excludes, before the first day of the following month. The main exclusions:

- A home, “regardless of its value” ([20 C.F.R. § 416.1212](https://www.law.cornell.edu/cfr/text/20/416.1212)). Paying off a mortgage on the home the person lives in fits here.
- One vehicle used for transportation, regardless of value ([§ 416.1218](https://www.law.cornell.edu/cfr/text/20/416.1218)).
- Household goods and personal effects, such as furniture, appliances, and electronics ([§ 416.1216](https://www.law.cornell.edu/cfr/text/20/416.1216)).
- Burial spaces, and up to $1,500 set aside for burial expenses ([§ 416.1231](https://www.law.cornell.edu/cfr/text/20/416.1231)).

Paying legitimate debts and buying things the person needs is fine. Giving the money away is not. SSI imposes a penalty for resources transferred for less than fair market value within a 36-month look-back, and the period of ineligibility can run up to 36 months ([42 U.S.C. § 1382b(c)](https://www.law.cornell.edu/uscode/text/42/1382b); [POMS SI 01150.110](https://secure.ssa.gov/poms.nsf/lnx/0501150110)). Handing the settlement to a sibling to hold is a transfer. The statute’s exception covers transfers into a trust established solely for a disabled person under 65, which is another reason the special needs trust is the default (§ 1382b(c)(1)(C)(ii)(IV)).

## When the injured person is a minor or lacks capacity

A settlement for a minor, or for an adult who can’t manage the claim, needs a judge’s approval. [Code Civ. Proc., § 372](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CCP&sectionNum=372) lets a guardian or [guardian ad litem](https://ridleylawoffices.com/estate-planning-glossary-california/guardian-ad-litem/) compromise the claim with court approval, and the money is then paid under Prob. Code, § 3600 and following. The petition is Judicial Council form [MC-350](https://courts.ca.gov/documents/mc350.pdf), with the order on [MC-351](https://courts.ca.gov/documents/mc351.pdf). Expedited approval under [California Rules of Court, rule 7.950.5](https://courts.ca.gov/cms/rules/index.cfm?title=seven&linkid=rule7_950_5) uses [MC-350EX](https://courts.ca.gov/documents/mc350ex.pdf).

The court can order the money paid into a special needs trust under [Prob. Code, § 3604](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=PROB&sectionNum=3604), but only after finding that the person has a disability that substantially impairs their ability to provide for their own care or custody, that they have special needs that won’t be met without the trust, and that the amount going in is reasonably necessary for those needs. Notice of the petition goes to DHCS and the Departments of State Hospitals and Developmental Services at least 15 days before the hearing ([Prob. Code, § 3602](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=PROB&sectionNum=3602)), and the order must provide that their statutory liens are satisfied first (§ 3604, subd. (d)).

A court-funded trust also comes with ongoing court oversight. [Rule 7.903](https://courts.ca.gov/cms/rules/index.cfm?title=seven&linkid=rule7_903) requires the trust to bar modification or revocation without court approval, calls for a bond under Prob. Code, § 2320, and has the court fix the trustee’s compensation. Attorney fees on the compromise are set under a reasonable-fee standard ([rule 7.955](https://courts.ca.gov/cms/rules/index.cfm?title=seven&linkid=rule7_955)).

## Repaying Medi-Cal from the settlement

If Medi-Cal paid for treatment of the injury, DHCS has a lien on the recovery, and California’s statute limits what it can take.

- **Notice.** A beneficiary who sues must give DHCS written notice within 30 days of filing ([Welf. & Inst. Code, § 14124.73](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=WIC&sectionNum=14124.73)), and notices of suit and settlement go to the director in Sacramento (§ 14124.79). No settlement is final until DHCS has had notice (§ 14124.76).
- **Medical share only.** [§ 14124.76](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=WIC&sectionNum=14124.76) limits the lien to the portion of the settlement that represents payment for medical expenses, and tells the court to be guided by [*Arkansas Dept. of Health & Human Services v. Ahlborn* (2006) 547 U.S. 268](https://www.law.cornell.edu/supremecourt/text/04-1506). *Ahlborn* held that federal law bars a state Medicaid lien on the non-medical part of a settlement.
- **Attorney fees.** The amount reimbursed is reduced by 25 percent as DHCS’s share of attorney fees ([§ 14124.72, subd. (d)](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=WIC&sectionNum=14124.72)).
- **A ceiling.** DHCS can’t recover more than the beneficiary nets after attorney fees and costs ([§ 14124.78](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=WIC&sectionNum=14124.78)), and the lien is the lesser of the amounts produced by those formulas (§ 14124.785).

California courts apply *Ahlborn*‘s reasoning without requiring its exact formula. In [*Bolanos v. Superior Court* (2008) 169 Cal.App.4th 744](https://www.courtlistener.com/c/Cal.%20App.%204th/169/744/), the court approved reducing the lien by the ratio of the settlement to the claim’s full value. [*Lopez v. Daimler Chrysler Corp.* (2009) 179 Cal.App.4th 1373](https://www.courtlistener.com/c/Cal.%20App.%204th/179/1373/) followed it. [*Aguilera v. Loma Linda University Medical Center* (2015) 235 Cal.App.4th 821](https://www.courtlistener.com/c/Cal.%20App.%204th/235/821/) held the trial court also had to apply the attorney fee reduction. At the federal level, [*Wos v. E.M.A.* (2013) 568 U.S. 627](https://www.law.cornell.edu/supremecourt/text/12-98) struck down a state’s fixed one-third allocation because the medical share has to reflect the actual case.

One open question: in [*Gallardo v. Marstiller* (2022) 596 U.S. 420](https://www.law.cornell.edu/supremecourt/text/20-1263), the Supreme Court held that federal law lets a state recover from the part of a settlement allocated to future medical care, not only past care. California’s statute speaks of medical care “provided on behalf of the beneficiary,” and I haven’t found a published California decision since *Gallardo* on whether that wording confines Medi-Cal to past care. How the settlement allocates damages between past medical, future medical, and non-medical losses matters for that reason.

## Repaying Medicare, and whether you need a set-aside

Medicare pays injury-related bills conditionally when a liability insurer is expected to pay. Once there’s a settlement, the beneficiary and anyone who receives the settlement money, including the attorney, must repay those conditional payments ([42 U.S.C. § 1395y(b)(2)(B)(ii)](https://www.law.cornell.edu/uscode/text/42/1395y); [42 C.F.R. § 411.24](https://www.law.cornell.edu/cfr/text/42/411.24)). Repayment is due within 60 days of receiving the settlement (§ 411.24(h)). Medicare reduces its claim by a share of procurement costs, meaning attorney fees and expenses, in the same ratio those costs bear to the whole settlement ([42 C.F.R. § 411.37(c)](https://www.law.cornell.edu/cfr/text/42/411.37)). CMS’s [recovery process page](https://www.cms.gov/medicare/coordination-benefits-recovery/beneficiary-services/recovery-process) explains the conditional payment letter and final demand.

Medicare set-asides get a lot of attention, and most of it comes from workers’ compensation. CMS runs a voluntary review program for workers’ comp set-asides, and its own page says no statute or regulation requires submitting one ([CMS, Workers’ Compensation Medicare Set-Aside Arrangements](https://www.cms.gov/medicare/coordination-benefits-recovery/workers-comp-set-aside-arrangements)). For liability settlements, there’s no statute or regulation requiring a set-aside and no CMS review process. CMS’s rulemaking on future medical expenses in liability cases was withdrawn on April 21, 2023 ([RIN 0938-AT85](https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202304&RIN=0938-AT85)). The real risk in a liability case is the general rule that Medicare is the secondary payer, so a settlement that pays for future injury-related care shouldn’t be structured to push that care back onto Medicare. For someone on Medicare and SSI or Medi-Cal, a special needs trust can hold funds for future injury-related care without affecting the means-tested benefits.

## A working order of operations

1. **Before settlement:** list every benefit the injured person receives, and whether each is SSI-linked, non-MAGI Medi-Cal, MAGI Medi-Cal, SSDI, or Medicare.
2. **Before settlement:** request the Medi-Cal lien amount from DHCS and the conditional payment amount from Medicare, and work on reducing them.
3. **Before settlement:** decide where the money goes: a first-party trust, a pooled trust account, an ABLE account, excluded purchases, or a combination. Have the trust signed, or the court petition drafted, before the check is issued.
4. **In the settlement documents:** direct payment to the trust, and make any annuity payable to the trust irrevocably.
5. **After settlement:** pay the liens, report to SSA within 10 days after the end of the month, and report to the county Medi-Cal office.
6. **After that:** the trustee spends under the benefit rules, keeps records, and files accountings if a court created the trust.

## Frequently asked questions

### Will a personal injury settlement stop my SSI?

It can. SSI counts the settlement as income in the month you receive it and as a resource starting the next month, and the resource limit is $2,000 for one person. Money paid directly into a qualifying special needs trust or pooled trust account isn’t counted (POMS SI 00830.515).

### Does a settlement affect SSDI or Medicare?

Savings don’t reduce SSDI, and Medicare eligibility has no asset test. Medicare does have to be repaid, within 60 days of settlement, for injury-related care it paid for conditionally (42 C.F.R. § 411.24(h)). Workers’ compensation can reduce SSDI under a separate offset rule.

### What is a first-party special needs trust?

A trust holding a disabled person’s own money, established before age 65 by the person, a parent, grandparent, guardian, or court, that repays Medi-Cal from what’s left at death (42 U.S.C. § 1396p(d)(4)(A)). Its assets don’t count for SSI or Medi-Cal.

### Can I give the settlement to a family member to hold?

No. Giving money away for less than fair market value can make you ineligible for SSI for up to 36 months (42 U.S.C. § 1382b(c)). A transfer into a qualifying trust for a disabled person under 65 is exempt.

### Can I put my settlement in an ABLE account?

Up to the annual limit, which is $19,000 in 2026, if your disability began before age 46. SSI ignores the first $100,000 in the account. A larger settlement usually needs a special needs trust, which can then fund the ABLE account each year.

### How much of my settlement can Medi-Cal take?

Only the share that represents medical expenses, reduced by 25 percent for attorney fees, and never more than you net after fees and costs (Welf. & Inst. Code, §§ 14124.72, 14124.76, 14124.78).

### Do I need a Medicare set-aside for a personal injury settlement?

No statute or regulation requires one for a liability settlement, and CMS doesn’t review them. CMS’s formal set-aside program covers workers’ compensation. Medicare still has to be repaid for conditional payments, and the settlement shouldn’t shift future injury-related costs onto Medicare.

### What if the injured person is over 65?

A first-party (d)(4)(A) trust isn’t available, because it requires the beneficiary to be under 65. A pooled trust has no age limit, but SSA warns that a transfer into one at 65 or older may trigger a transfer penalty. Get individual advice before moving any money.