Housing is the largest expense in most beneficiaries’ lives, and “can the trust pay the rent?” is the question I hear most from new trustees. The answer is yes. But there is a Social Security rule that trustees need to understand first, because it changes the math.

The short answer

A special needs trust can pay rent, a mortgage, property taxes, and utilities for the beneficiary. Nothing in trust law or Medicaid law prohibits it. The complication comes from the Supplemental Security Income (SSI) program, which treats shelter paid by someone else as income to the beneficiary and reduces the monthly check accordingly. If your family member does not receive SSI, most of this article does not apply.

In-kind support and maintenance

SSI is a needs-based program, so Social Security counts not only cash income but also help with basic needs. When someone other than the recipient pays for their shelter, Social Security calls it in-kind support and maintenance, or ISM. A trust is “someone else” for this purpose, even though the money is set aside for the beneficiary.

Shelter, for ISM purposes, means rent, mortgage principal and interest, real property taxes, heating fuel, gas, electricity, water, sewer, and garbage removal. It does not include phone, internet, cable, furniture, appliances, repairs, or renter’s insurance. A trust can pay those without any SSI effect.

How much SSI is reduced

The reduction is capped. Under the rule that applies when the beneficiary lives in their own home or apartment and the trust pays some or all of the shelter costs, the most Social Security can count is one third of the federal benefit rate plus $20. For 2026, the federal benefit rate is $994 a month, so the maximum reduction is $351.33.

That cap is the key to planning. Whether the trust pays $400 or $2,000 a month toward housing, the SSI check drops by no more than $351.33.

If the trust pays less than that amount in a month, Social Security counts the actual value of the help instead, minus a $20 general exclusion.

What changed on September 30, 2024

For decades, food counted as ISM alongside shelter. A trust that paid for groceries or meals triggered the same reduction, and trustees tied themselves in knots avoiding it. Social Security published a final rule removing food from the ISM calculation, effective September 30, 2024. Since then, a trust can pay for groceries, restaurant meals, and meal delivery services with no effect on SSI. Social Security estimated that about 41,000 recipients saw their benefit increase by an average of $132 a month when the rule took effect.

Shelter was not part of that change. Rent and utilities paid by the trust still count.

A worked example

Suppose your son receives the full 2026 SSI benefit of $994 a month and rents an apartment for $1,400. If he pays the rent himself, he has almost nothing left for anything else. If the trust pays the rent, his SSI drops by $351.33 to $642.67, but he keeps the entire $994 he would otherwise have spent on rent. His monthly position improves by more than $1,000. Most trustees in that situation pay the rent, report it, and accept the reduction.

Four ways trustees plan around the rule

1. Pay the shelter cost and accept the reduction

As the example shows, when rent is large, the reduction is a small price. The trustee should simply understand it in advance and report it.

2. Pay everything that is not shelter

Phone, internet, cable, streaming, furniture, cleaning, repairs, renter’s insurance, transportation, clothing, and now food are all outside the rule. A trust that covers all of those may leave the beneficiary enough SSI to pay the rent themselves.

3. Route housing money through an ABLE account

Money the beneficiary spends from their own ABLE account on housing is not ISM, because the beneficiary is paying, not a third party. A trust can contribute to the beneficiary’s ABLE account (up to the $20,000 annual contribution limit in 2026, combined from all sources). The beneficiary then pays rent from the ABLE account. One caution: ABLE funds withdrawn for housing must be spent in the same month they are withdrawn, or they become a countable resource the following month.

4. Have the trust own the home

If the trust owns the house or condo the beneficiary lives in, the beneficiary’s rent-free occupancy is generally not ISM, though property taxes, insurance, and utilities the trust pays may still be counted. This is a larger planning step and worth an attorney’s review, but for families with a home to leave, it is often the best long-term answer.

Report it

Whatever the trustee decides, shelter paid by the trust must be reported to Social Security. Unreported ISM shows up later as an overpayment, and Social Security will collect it from future checks. A short letter to the local office, kept in the trust file, is enough.

Two things trustees should never do

• Give the beneficiary cash for rent. Cash from the trust to the beneficiary is unearned income, counted dollar for dollar after a $20 exclusion. That is far worse than the capped ISM reduction.
• Skip the trust and have a parent pay directly. The ISM rule applies to any third party. A parent paying rent triggers the same reduction as the trust paying it, without the record-keeping and protection the trust provides.

When housing decisions get complicated

Group homes, shared apartments with roommates, Section 8 vouchers, and family-owned homes each have their own wrinkles. If you are a trustee facing one of those, book a free consultation and we will walk through it. If you do not yet have a trust to hold the money in the first place, our attorney-drafted Will and Special Needs Trust package is $299.

Education is always free. That is the reason the nonprofit exists.

This article provides general legal information, not legal advice. SSI figures are for 2026 and change each January. Questions? Email tom@specialneedstrustsonline.com or call 508-690-0012.

Pooled trusts are mentioned more often every year, usually by a hospital social worker, a settlement attorney, or a Medicaid caseworker. They are a real option and, for some families, the right one. But the trade-offs are rarely explained before the joinder agreement is signed.

This article compares a pooled special needs trust with an individual trust so you can decide which one fits your family, and know what to ask before you commit either way.

What a pooled special needs trust is

A pooled trust is a special needs trust established and managed by a nonprofit organization. Federal Medicaid law recognizes it specifically. Each beneficiary has a separate sub-account for accounting purposes, but the money of all beneficiaries is pooled for investment, and the nonprofit serves as trustee for everyone.

You do not draft your own trust document. Instead, you sign a joinder agreement that enrolls your family member in the nonprofit’s master trust. Pooled trusts can accept the beneficiary’s own money (a first-party sub-account) or money from parents, grandparents, and others (a third-party sub-account).

What an individual special needs trust is

An individual trust is a document drafted for one beneficiary. A trustee you choose, whether a family member, an independent professional trustee, or a bank, manages it under the terms you set. There are two kinds:

• A third-party trust holds money from family and friends. It has no Medicaid payback, and the remainder goes to whoever the trust names.
• A first-party trust holds the beneficiary’s own money, such as a settlement or an inheritance left directly. It must repay Medicaid from what remains at the beneficiary’s death.

Both kinds protect SSI and Medicaid eligibility, and so do their pooled counterparts. The difference between pooled and individual is not whether benefits are protected. It is cost, control, and what happens at the end.

Cost

Pooled trusts charge an enrollment fee, an annual administrative fee, and often a fee per disbursement. Those fees vary widely, so ask for the full schedule in writing. The fees pay for professional administration, which has real value, but on a small account they can be a meaningful percentage every year.

An individual trust has a one-time drafting cost. Our attorney-drafted Third-Party Special Needs Trust and First-Party Special Needs Trust are $299 each; private firms typically charge $3,000 or more. After that, a family trustee usually serves without a fee. If you hire an independent trustee, expect an hourly rate or roughly one percent of the trust per year.

Control and speed

With a pooled trust, the nonprofit decides which requests to approve. Most are reasonable and experienced, but the decision goes through their process, and it can take days or weeks. If your daughter needs a new wheelchair cushion this week, that delay matters.

With an individual trust, the trustee you chose can decide the same day, and the trust document can give specific instructions about the beneficiary’s lifestyle, housing, and priorities. That flexibility is the main reason most parents who have a willing trustee choose their own trust.

What happens to the money at the end

This is the difference families are least often told about.

When the beneficiary of a first-party pooled sub-account dies, federal law allows the nonprofit to retain some or all of what remains for the benefit of other beneficiaries in the pool. Whatever the nonprofit does not keep must go to repay Medicaid. The family typically receives nothing. Policies vary by nonprofit; some keep everything, some keep a percentage, so ask.

With a third-party pooled sub-account, there is no Medicaid payback, but the nonprofit may still retain a share of the remainder under its joinder agreement.

With an individual third-party trust, there is no payback and no retention. The remainder goes to the people you name, often siblings or a charity you care about.

When a pooled trust is the right choice

• There is no family member or independent trustee available to serve, and the amount is too small for a bank or trust company to accept.
• The beneficiary is over 65 and needs a first-party trust. Federal law limits individual first-party trusts to beneficiaries under 65, and a pooled trust may be the only option, though some states penalize transfers to a pooled trust after 65. Check your state’s rule.
• A settlement is small and needs to be protected quickly, without setting up separate trust administration.
• The family wants professional administration and accepts the fees and the retention policy.

When your own trust is the better fit

• A parent, sibling, or independent trustee is willing to serve.
• The money comes from family (third-party), which means no payback and a remainder you control.
• You want the trustee to respond quickly and to follow instructions specific to your child.
• The trust will eventually hold a larger amount, such as life insurance or a share of your estate, where annual pooled fees add up.

Questions to ask a pooled trust before you join

1. What are the enrollment fee, the annual fee, and any per-transaction fees?
2. What is your policy on retaining funds at the beneficiary’s death, and is it in the joinder agreement?
3. How long does a typical disbursement request take?
4. Can a family member be named as an advisor or advocate on the account?
5. What happens to the sub-account if the nonprofit closes or merges?

You can use both

Some families use a pooled trust for a beneficiary’s own funds, such as a small settlement, and an individual third-party trust for what the parents will leave later. Nothing prevents that, and it often gives the best of each.

If you are weighing the two, book a free consultation and we will walk through the five questions with you. Education is always free. That is the reason the nonprofit exists.

This article provides general legal information, not legal advice. Pooled trust terms and state Medicaid rules vary. Questions? Email tom@specialneedstrustsonline.com or call 508-690-0012.

A grandparent updates a will and names every grandchild equally. It feels fair. For a grandchild who receives SSI or Medicaid, that equal share can be the most expensive gift they ever receive.

This is one of the most common problems I see in consultations, and it is almost always a surprise to the family. The grandparent meant well. The attorney who drafted the will may never have been told that one grandchild has a disability. The money arrives, benefits stop, and the family spends months trying to undo it.

This article explains why direct gifts cause the problem, what a third-party special needs trust does about it, and the exact instructions to give a grandparent and their attorney.

Why a direct inheritance ends benefits

Supplemental Security Income (SSI) has a resource limit of $2,000 for an individual. In most states, Medicaid eligibility for an adult with a disability is tied to SSI or uses the same limit. Resources are counted on the first day of each month. If your son or daughter has more than $2,000 in countable assets on that day, SSI stops for the month, and Medicaid can stop with it.

An inheritance paid directly to your child is a countable resource the moment they have the legal right to it. So is a life insurance payout, a payable-on-death bank account, or a share of a retirement account where your child is the named beneficiary. The size of the gift does not matter once it crosses $2,000.

The damage goes beyond the monthly check. In many states, Medicaid is the door to waiver services: day programs, personal care, supported employment, and residential support. Losing eligibility, even briefly, can mean losing a place in a program with a waiting list.

What a third-party special needs trust does

A third-party special needs trust is a trust funded with money that belongs to someone other than the beneficiary. Parents, grandparents, aunts, uncles, and family friends can all give to it, during life or at death. A trustee holds the money and spends it for the benefit of your child on things that public benefits do not cover: therapies, travel, a phone, a computer, clothing, recreation, education, and much more.

Because the beneficiary does not own the money and cannot demand it, the trust does not count toward the $2,000 limit. SSI and Medicaid continue.

Two features make the third-party trust the right vehicle for grandparent gifts specifically:

• No Medicaid payback. When the beneficiary dies, whatever remains in a third-party trust goes to the people the person who created the trust chose, often siblings or a charity. That is different from a first-party trust, which must repay Medicaid first.
• One destination for everyone. Once the trust exists, every relative can name it. Grandparents, godparents, and friends do not each need their own trust. They only need the trust’s name.

The instructions to give a grandparent

Once your third-party trust is signed, the message to grandparents is short. Here is the language I suggest:

“Please do not leave anything directly to [name]. Instead, leave [name]’s share to the [Family Name] Supplemental Needs Trust dated [date]. Your attorney can add that to your will or trust in a few minutes. The same applies to life insurance and any account with a beneficiary form.”

Give them a copy of the first page and the signature page of the trust so their attorney can confirm the name and date. They do not need the whole document.

Gifts during life work the same way

The same rule applies to birthday and holiday checks. A $500 check written to your adult child is income in the month received and a resource the next month if unspent. A $500 check written to the trust is neither. If grandparents like to give cash, ask them to write it to the trust, or to an ABLE account, which allows up to $20,000 in contributions per year in 2026 from all sources combined without affecting SSI.

What if the money has already been left directly?

If a grandparent has already passed away and the will names your child directly, do not spend the money before you get advice. Two tools may still protect it:

• A first-party special needs trust can hold the beneficiary’s own money, including an inheritance, and preserve eligibility. It requires a Medicaid payback at the end, but it keeps benefits in place now.
• An ABLE account can absorb up to the annual contribution limit, and the first $100,000 in an ABLE account is excluded from the SSI resource limit.

Timing matters. Contact us or your attorney before the estate distributes the funds.

A conversation worth having this fall

Many families see grandparents over the holidays. It is a natural time to have this conversation, and it is easier when the trust already exists and you can hand over a name and a date. Our Will and Third-Party Special Needs Trust package is $299 and is drafted by a disability-law attorney. Private firms typically charge $3,000 or more.

If you are not sure which trust fits your situation, book a free consultation. Education is always free. That is the reason the nonprofit exists.

This article provides general legal information, not legal advice. Rules vary by state. Questions? Email tom@specialneedstrustsonline.com or call 508-690-0012.

When I meet with families about special needs trusts, the question that stops them is rarely about the documents. It is about the person. Who will manage this trust when we are gone? Some families have an obvious answer: a sibling, an aunt, a trusted friend. Many do not. And when families start looking at banks and trust companies, they find high fees and minimum balances that put a corporate trustee out of reach for an ordinary trust.

There is a middle path that most families have never heard of: the independent trustee.

What an independent trustee is

An independent trustee is an individual professional who administers trusts as their occupation. They are not employees of a bank or a trust company. They run their own small practices, which keeps overhead low, and they usually charge either an hourly rate or a yearly fee of around one percent of the trust. Corporate trustees often charge more than that and may decline trusts below a minimum balance entirely.

The lower fee is not the only advantage. An independent trustee has a small client list, so the person who knows your son or daughter is the same person who answers the phone. For a special needs trust, where the trustee’s decisions touch SSI, Medicaid, housing, and daily quality of life, that continuity matters as much as the cost.

Where to find one: a national directory

Until recently, finding an independent trustee meant asking around and hoping. Now there is a national resource. The Independent Trustee Alliance directory lets you search by state and filter for trustees who handle special needs trusts. ITA certified trustees must have years of trustee experience, ongoing continuing education, professional references, and agree to a code of ethics. A listing is not a guarantee, but it is a real starting point that did not exist for earlier generations of families.

A second place to look is the National Guardianship Association’s Find a Guardian directory, which lists individual professional fiduciaries across the country, many of whom also serve as trustees.

We have added a permanent page to our site with both listings and the questions to ask before you hire anyone: Find an Independent Trustee. You will find it in our Resources menu from now on.

How to interview a trustee candidate

Treat this like hiring for the most important job in your child’s future, because it is. Ask what they charge and when. Ask how many special needs trusts they administer and how they stay current on SSI and Medicaid rules. Ask about their succession plan: what happens to your trust if something happens to them? Ask whether they carry errors and omissions insurance. And ask whether a family member can serve alongside them as co-trustee or trust advisor, which lets your family keep a voice while the professional handles the rules.

One note of caution that applies to any directory: a listing is a starting point, not an endorsement, and that includes the directories we link to. Interview more than one candidate, check references, and make sure the fee arrangement is in writing.

You do not have to decide alone

Our mission is to give families free legal educational information so you can make informed decisions, whether you use our low-cost documents, hire your own lawyer, or both. If you want to talk through your trustee decision, the consultation is free. Education is always free. Email tom@specialneedstrustsonline.com or call 508-690-0012.

Ask a room full of parents what stops them from setting up a special needs trust, and eventually someone will say it out loud:

“I’ve heard the state takes it all back when he dies. So what’s the point?”

It is the most common reason families walk away from a trust, and for most of them it is simply not true.

The confusion comes from the fact that there are two different kinds of special needs trust, both are called “special needs trusts,” and only one of them has a Medicaid payback. Which one you are dealing with comes down to a single question.

Whose money is it?

That is the whole test. It does not matter who set the trust up or whose name is on it. What matters is whose money went in.

So here is the answer to the question that stops so many families:

If you are a parent or grandparent planning to leave money to a loved one with a disability, you are creating a third-party trust. There is no Medicaid payback at any point. The money you leave stays in your family.

The payback rule that everyone has heard about is real, but it attaches to the first-party trust, and only because Congress required it in exchange for letting someone shelter their own money and stay on benefits. It is the price of a very good deal, not a punishment. A fuller side-by-side comparison is here →

The mistake that turns one into the other

Now the part that actually costs families money.

A third-party trust only stays a third-party trust if the money goes straight into it and never touches your child’s hands. The moment an inheritance lands in your adult child’s name, even for a day, even by accident, it becomes their money. Their money can only be sheltered in a first-party trust, with the payback.

Here is how that happens in real life, over and over:

• A grandparent writes a will leaving “$25,000 to each of my grandchildren,” with the best intentions in the world.
• A parent names their adult child as a beneficiary on a life insurance policy or a retirement account, because that is what the form asks for.
• A relative dies without a will, and state law hands your child a share automatically.
• A well-meaning aunt opens a savings account for your child and puts their name on it.

Any one of these can do two things at once. It can push your child over the $2,000 resource limit and knock them off SSI and Medicaid, and it can convert money that could have passed cleanly to the family into money the state gets reimbursed from.

The fix is simple. Nobody leaves money to your child. Everybody leaves money to the trust, and the trust takes care of your child. The same money serves the same purpose with a completely different outcome.

Three things to do this month

1. Set up the third-party trust first. It has to exist before anyone can name it. Until it does, every relative’s will is pointed at a target that is not there.
2. Check your beneficiary designations. Life insurance, 401(k), IRA, pension, savings bonds. These pass outside your will. A perfect will cannot save a retirement account that names your child directly. This is the most commonly missed step in special needs planning, and it takes twenty minutes to fix.
3. Tell the grandparents. Have the conversation, awkward as it is. Give them the exact language: leave the gift to the trust, not to the child. Most families find that relatives are relieved to be told. They were worried about doing the wrong thing and had no idea what the right thing was.

Watch: Special Needs Trusts & Wills Explained

Attorney Tom Sannicandro walks through how the trust and the will work together, why beneficiary designations matter more than most families realize, and what belongs in each document.

What if the money is already in your child’s name?

It happens, and it is not fatal. A first-party special needs trust can still shelter it and protect their benefits. The payback applies, but the alternative is spending the money down to $2,000 and losing years of Medicaid coverage in the meantime. Sheltering it is almost always the better outcome. First-party trusts for adults with disabilities →

An ABLE account can also hold a modest amount of the beneficiary’s own money. Note that ABLE accounts do carry a Medicaid payback, which is another reason the large, long-term money belongs in a third-party trust and the everyday spending money belongs in ABLE.

What it costs

Attorneys typically charge $3,000 to $5,000 for a special needs trust and a coordinated will. We are a 501(c)(3) nonprofit founded by a disability law attorney who is also the father of an adult son with Down syndrome, and a complete personalized trust and will is $189.99. You answer guided questions in plain English and the documents are emailed to you when you finish.

The Letter of Intent and the HIPAA Release are free to anyone, with no purchase.

Create Your Third-Party Special Needs Trust →

Not sure which kind you need? Book a free 10-minute session and we will tell you straight.

This article is general information about how these trusts work, not legal advice about your family’s situation. State Medicaid rules and trust requirements vary. If your situation involves a settlement, an inheritance already received, or a trust that has already been funded, talk with us or with an attorney in your state before you act.