If you love someone with a disability, you’ve probably thought about who will look out for them when you can’t. It might be your child, a sibling, or a grandchild. You want to leave them something that helps. But here’s a hard truth many families don’t learn until it’s too late: leaving money directly to a person who receives SSI or Medicaid can cost them those benefits.
The good news is there are tools built specifically for this. With the right plan, you can help your loved one without putting their support at risk.
Why a Direct Inheritance Can Backfire
Supplemental Security Income (SSI) is a needs-based program. To qualify, a person can generally have no more than $2,000 in countable resources ($3,000 for a couple). Medicaid eligibility is often tied to SSI.
So if Grandma leaves $50,000 directly to a grandson who receives SSI, that inheritance could push him over the limit. His SSI could be suspended until the money is spent down, and his health coverage could be at risk too.
The same problem can happen with life insurance, retirement accounts, or payable-on-death accounts that name the person directly. That’s why reviewing beneficiary forms is part of every special needs plan. Here’s who can change the beneficiary on a life insurance policy if you need to make updates.
Option 1: A Third-Party Special Needs Trust
A third-party special needs trust (sometimes called a supplemental needs trust) is created by a parent, grandparent, or other family member and funded with that person’s money, not the beneficiary’s.
Here’s why families like it:
- The trustee you choose can pay for things that improve your loved one’s quality of life, like therapies, education, recreation, travel, or equipment, without the money counting as theirs.
- It can receive gifts and inheritances from multiple family members.
- When your loved one passes, whatever is left can go to other family members you name.
The trust needs to be drafted carefully, and the trustee needs to understand how distributions affect benefits. Choosing the right trustee is one of the most important decisions in the plan. If you’re new to trusts, our post on revocable vs. irrevocable trusts covers the basics.
Option 2: A First-Party Special Needs Trust
If the money belongs to the person with the disability, such as a personal injury settlement or an inheritance they already received, a different type of trust may be needed. These first-party trusts follow stricter federal rules and generally have to pay Medicaid back from what’s left when the beneficiary dies. They work, but they’re very different from a third-party trust, so the source of the money matters.
Option 3: An ABLE Account
ABLE accounts are tax-advantaged savings accounts for people with disabilities. Both states have programs: the Kansas ABLE Savings Plan and MO ABLE in Missouri.
Key points:
- As of January 1, 2026, a person whose disability began before age 46 may qualify. The old cutoff was age 26, so many more people are eligible now.
- The first $100,000 in an ABLE account doesn’t count toward the SSI $2,000 resource limit.
- Family and friends can contribute, up to the annual federal limit.
- The account owner can use the money for qualified disability expenses, like housing, transportation, education, and health care.
ABLE accounts and special needs trusts often work best together. The trust holds the larger inheritance, and the ABLE account gives your loved one some day-to-day independence.
Don’t Forget Decision-Making
Money is only part of the plan. Think about who will help your loved one make medical and financial decisions as an adult. Depending on their abilities, that might mean a power of attorney, health care directives, or, in some cases, guardianship. Our post on Kansas advance medical directives explains the health care side.
For parents of younger kids, our Minor Children life stage page covers naming guardians and directing how and when children receive property.
Build a Plan That Fits Your Family
Every family’s situation is different, and special needs planning works best when it’s done before something happens. Bloom Legal Advisors helps families across Kansas and Missouri build estate plans that protect the people they love most. Learn more about working with a Kansas City estate planning attorney, or schedule your Empowering Estate Education Discussion. Call (913) 954-5151 with questions.
Frequently Asked Questions
Can an inheritance affect SSI benefits?
Yes. SSI has a $2,000 resource limit for an individual. An inheritance left directly to someone on SSI can put them over the limit and suspend their benefits.
What is a special needs trust?
A special needs trust holds money for a person with a disability so it can be used for their benefit without counting as their own resources for SSI and Medicaid.
Who qualifies for an ABLE account in Kansas or Missouri?
Starting January 1, 2026, people whose disability began before age 46 and who meet the disability requirements may open an ABLE account.
Does an ABLE account affect SSI?
The first $100,000 in an ABLE account doesn’t count toward the SSI resource limit.
What’s the difference between a first-party and third-party special needs trust?
A third-party trust is funded with someone else’s money, such as a parent’s. A first-party trust holds the beneficiary’s own money and generally must repay Medicaid after the beneficiary dies.
