A Bridge, Not a Barrier: How Estate Planning Secures the Future for Disabled Californians

For families with a member who has a disability, traditional estate planning—the simple transfer of assets—can be disastrous. In California, effective estate planning is not just about passing on wealth; it is a critical strategy to preserve a loved one's independence, eligibility for essential public benefits, and overall quality of life.

The goal is to provide financial support without compromising access to Medi-Cal (California's Medicaid program) and Supplemental Security Income (SSI), both of which have extremely strict limits on the beneficiary's countable assets (typically $2,000 for an individual).

Here is how strategic estate planning directly impacts the lives of disabled Californians.

1. The Threat of Disqualification: SSI and Medi-Cal

The biggest challenge in planning for a disabled loved one is the risk of benefit disqualification.

• The Trap of a Simple Inheritance: If an individual who receives SSI or Medi-Cal is named as a direct beneficiary in a Will or Trust, any inheritance, even a modest one, is counted as a countable resource. Once these funds exceed the $2,000 asset limit, the individual is immediately disqualified from both programs.

  
  

• The Loss of Essentials: Disqualification means the loss of the SSI monthly cash stipend and, more critically, the loss of Medi-Cal coverage, which is often the only source for long-term care, prescription drugs, and essential health services.

2. The Cornerstone Solution for Your Disabled Family Member: The Special Needs Trust (SNT)

The Special Needs Trust (SNT), also known as a Supplemental Needs Trust, is the primary legal tool used to solve this problem.

• How it Works: An SNT holds assets for the beneficiary's benefit but is legally structured so that the assets are not considered "owned" by the beneficiary. Because the beneficiary does not own the funds, their eligibility for SSI and Medi-Cal is preserved.

  
  

• Purpose of Funds: SNT funds are used for supplemental needs—expenses that enhance the beneficiary's quality of life but are not covered by public benefits. These can include:

  
  

  • Uncovered medical or dental care

  • Educational expenses or job training

    
    

  • Travel and recreation

    
    

  • Special equipment (e.g., computers, adapted vehicles)

    
    

Two Critical Types of SNTs:

SNT Type	Funding Source	Medi-Cal Payback Requirement
Third-Party SNT	Funded with assets from parents, grandparents, or other family members (assets the beneficiary never owned).	No Medi-Cal payback required. Remaining funds can pass to other family members.
First-Party SNT	Funded with the beneficiary's own assets (e.g., personal injury settlement, late inheritance).	Yes, a "payback" provision is required. Upon the beneficiary's death, the state must be reimbursed for all Medi-Cal funds spent during the SNT's existence before any remaining funds can pass to others.

3. The Newest Planning Tool: CalABLE Accounts

California's ABLE (Achieving a Better Life Experience) accounts complement SNTs by offering the disabled person a tool for personal savings and direct financial control.

• Asset Exemption: Funds in a CalABLE account (up to $100,000) are exempt from the SSI asset limit.

  
  

• Direct Control & Housing: Unlike an SNT (which limits direct cash payments), the beneficiary is the account owner and can use CalABLE funds for housing expenses without incurring the SSI benefit reduction penalty.

• Eligibility: To open a CalABLE account, the individual must have developed their disability before the age of 26(or age 46 beginning in 2026).

  
  

4. Protecting the Family's Estate: Medi-Cal Recovery

For elderly parents of a disabled adult who may rely on Medi-Cal for their own long-term care, estate planning is crucial to protect the family home.

• The Recovery Rule: When a Medi-Cal beneficiary dies (who was 55 or older, or permanently institutionalized), the state is generally required to attempt to recover costs from the deceased person's probate estate.

  
  

• The Disabled Child Exemption: California law prohibits Medi-Cal recovery if the deceased Medi-Cal recipient is survived by a disabled child of any age. This is a vital protection, but a proper estate plan (like a Living Trust) is still necessary to ensure the home avoids probate and passes smoothly to the disabled heir.

  
  

  

By integrating SNTs, CalABLE accounts, and probate-avoidance tools (like a Revocable Living Trust), California families can create a cohesive plan that preserves government benefits while providing the disabled individual with dignity, flexibility, and a secure financial future.

Navigating the intersection of estate planning and public benefits in California is far too complex to attempt alone. Without an expert's guidance, a single misplaced dollar or improperly worded trust provision can result in the loss of critical services like SSI and Medi-Cal, jeopardizing your loved one's entire care structure. Generic documents purchased online or created without specialized legal knowledge simply do not contain the necessary safeguards—such as the crucial language for a Special Needs Trust—to protect eligibility. To ensure your plan is compliant, effective, and truly secures the financial future you intend, the most important step you can take is to consult an estate planning attorney today.

Disclaimer: Please be advised that the information provided in this article is for educational and informational purposes only and does not constitute legal advice. The complexity of estate planning, Special Needs Trusts, SSI, and Medi-Cal regulations—especially in California—requires a nuanced understanding of current state and federal laws. Every individual's financial situation and public benefit eligibility is unique. Therefore, you should not rely on this information as a substitute for professional legal counsel. Always consult with a qualified estate planning attorney or special needs planner to discuss your specific situation and obtain advice tailored to your needs.