Heads up — a big change is coming January 1, 2027. California's Medi-Cal asset limit is scheduled to drop from $130,000 back to just $2,000 for older adults and people with disabilities. If you receive Medi-Cal or SSI, an inheritance or settlement could put your benefits at risk — here's how to protect them.
Inherited Money or Won a Settlement? Don't Lose Your SSI and Medi-Cal
A sudden inheritance or legal settlement can feel like a threat when you rely on needs-based benefits. A Special Needs Trust is built for exactly this moment — here's how it works.
A relative passes away and leaves you $40,000. Or a personal injury case finally settles and a check is on the way. For most people, that is unqualified good news. For someone who relies on SSI and Medi-Cal, it can feel like a threat — because a sudden lump sum can push you past the strict limits those programs set, and the income, in-home care, and health coverage you depend on can be suspended or lost.
The reassuring part: there are legal tools built for exactly this situation. The most powerful is the Special Needs Trust (SNT). Understanding how it works — and how it differs from an ABLE account — can turn a moment of panic into a manageable plan. This article explains the options. It is not legal or financial advice, and the single most important step is talking to a qualified special-needs attorney before you accept or move any money.
Why a windfall puts your benefits at risk
The number to plan around is $2,000 — and California's Medi-Cal asset limit is scheduled to return to it on January 1, 2027.
Supplemental Security Income (SSI) is needs-based. To qualify, you can have no more than $2,000 in countable resources ($3,000 for a couple) — a federal limit set by Congress that has not changed in decades. An inheritance or settlement sitting in your bank account counts as a resource the month after you receive it. Cross the $2,000 line and SSI payments can stop.
Because many Californians receive Medi-Cal automatically through SSI, losing SSI can also mean losing that health coverage. Medi-Cal’s asset rules have been a moving target: California dropped its asset test entirely in 2024, reinstated a $130,000 limit for “non-MAGI” programs (Aged, Blind & Disabled Medi-Cal, Long-Term Care and others) on January 1, 2026 — and, under the state’s 2026–27 budget, is scheduled to lower that limit all the way back to the federal level of $2,000 for an individual ($3,000 for a couple) on January 1, 2027. Income-based (MAGI) Medi-Cal still has no asset test.
Plan around $2,000
This is the number that matters most going forward. It already governs SSI and SSI-linked Medi-Cal, and starting January 1, 2027 it is scheduled to apply to non-MAGI Medi-Cal — the coverage many older adults and people with disabilities rely on — dropping from the $130,000 limit that applied during 2026. A shrinking asset limit makes tools like a Special Needs Trust more important, not less.
The takeaway: the risk is real, it depends on which benefits you receive, and — with the Medi-Cal limit scheduled to return to $2,000 in 2027 — the amount that trips the wire is small and getting smaller.
What a Special Needs Trust does
A Special Needs Trust holds money for a person with a disability without that money counting against SSI or Medi-Cal limits. A trustee — not the beneficiary — controls the funds and spends them on the beneficiary’s behalf for things the trust is allowed to cover: therapies, equipment, education, travel, technology, and many quality-of-life expenses that public benefits do not pay for. Because the beneficiary cannot simply withdraw the money at will, the government does not count it as a personal resource.
There are three main kinds, and the difference matters:
- First-party SNT — funded with the beneficiary’s own money, such as an inheritance or a lawsuit settlement. This is the classic fix for the panic scenario. It must be set up while the beneficiary is under 65, and when the beneficiary dies, the state must be repaid for the Medi-Cal it provided (the “payback” rule) before anything passes to heirs.
- Third-party SNT — funded by someone else, most often parents or grandparents planning ahead. Because it never held the beneficiary’s own money, there is no payback to the state; whatever remains can go to other family members. This is a planning tool, not usually an emergency fix.
- Pooled SNT — run by a nonprofit that manages many beneficiaries’ funds together in separate sub-accounts. It can be a practical, lower-cost option, has no age-65 cutoff to join, and is often used when the amount is modest or no individual trustee is available.
Special Needs Trust vs. ABLE account
An ABLE account is a simpler, related tool — a tax-advantaged savings account a person with a disability can open and control themselves. It is genuinely useful, but smaller in scope than a trust.
- Who controls it: the beneficiary controls an ABLE account; a trustee controls an SNT.
- How much it holds: ABLE accounts have annual contribution caps (around $20,000 in 2026, higher for some workers), and only the first $100,000 is excluded for SSI purposes. An SNT has no such contribution ceiling — which is why a large inheritance or settlement usually needs a trust.
- Who qualifies: ABLE accounts require the disability to have begun before age 46 (an expansion effective in 2026). SNTs have no age-of-onset rule.
- In California: CalABLE accounts are, in most cases, protected from Medi-Cal estate recovery — a point in ABLE’s favor compared with a first-party trust’s payback rule.
In practice, many families use both: an SNT to hold a large sum, and an ABLE account for day-to-day spending the beneficiary manages directly.
What to do if money is coming
Do not deposit a large inheritance or settlement into your regular account and hope it works out — timing and the type of trust both matter, and mistakes can be costly or hard to undo. Instead:
- Act before the money arrives if you can. Your options are wider before funds hit your account.
- Talk to a special-needs attorney or an accredited benefits-planning professional. They can tell you which trust or account fits your age, your situation, and the specific benefits you receive.
- Ask about low-cost help. Local legal aid and disability rights organizations may offer free or reduced-cost guidance, and pooled trusts can be an affordable route.
A windfall should not cost you the support you rely on. With the right tool and the right advice, it does not have to.
Important — Not Legal or Financial Advice
This article is general information only. Benefit rules change and depend on your specific circumstances. Before accepting or moving an inheritance or settlement, consult a qualified special-needs attorney or accredited benefits counselor.
