People who live with disabilities often have less income and fewer assets than the rest of the population. If you depend on public benefits programs, it can be hard to think about saving money for the future. If you live only on the money you get from Supplemental Security Income (SSI) you will be below the poverty level. Many other programs have asset limits that make it hard to save money.

It can seem like public benefits programs are a trap; they don’t give you enough money to cover all your expenses and they restrict your options for building assets and making more money. And, if you want to make a change in your life, it can be hard to try and follow all the rules that you need to in order to keep your benefits.

Building assets is an important part of becoming financially independent. Even if you face obstacles that make it hard to save money, building assets should be a priority. If you don’t have assets, it is much harder to become economically secure.

Assets give you an economic cushion and open the door to more opportunities. Careful planning can make it possible to build wealth, buy a home, or start a business, while still having enough money to live on. The economic stability that comes with assets can help you meet your goals, let you work toward freedom from dependence on benefits, and increase your wealth.

Financial Literacy

Developing a general understanding of finances (or “financial literacy”) and skills such as budgeting and long-term financial planning is important for everyone. But it is especially important if you have to follow the low-income and asset rules of public benefits programs.

Learning about finances can help you do big things like pay for college, buy a house, or plan for old age. It can also help you stay away from scams and prepare for unexpected expenses and difficult life events.

There are several reasons financial literacy is especially important for people with disabilities:

• People with disabilities have higher out-of-pocket costs for everyday activities

• People with disabilities can have high medical costs (and medical debt is a major cause of bankruptcy for all people)

• Relying on public benefits programs is hard. There are a lot of rules and restrictions about money and assets that most people don’t ever have to think about

If you have a disability that meets Social Security’s standards (there are separate disability standards for children or youth, for adults, and for blindness) and your disability began before you turned 26, you can open an ABLE account. An ABLE account is a financial account that can help you:

• Build assets in an account that has tax advantages. Your investments in an ABLE account won’t be taxed, so your wealth will grow faster. Plus, If you work and save earned income in your ABLE account, you may qualify for the federal Saver’s Credit.
• Use your savings on many types of expenses. There are rules about spending the money in your ABLE account, but there’s also a lot of flexibility.
• Save up money without losing benefits. Many benefits programs have resource limits, but:
  • You can have up to $100,000 in your ABLE account and keep getting Supplemental Security Income (SSI) benefits, as long as you meet all other SSI rules. If you go over $100,000, SSI benefits will stop, but they will start up again if your ABLE account drops back below $100,000 and you won't have to reapply.
  • For Medi-Cal and CalFresh, the money in your account will not affect your benefits, no matter how much you have.
  • The money in your ABLE account may not be counted for some other benefits. Check with program representatives to make sure.

The bottom line: An ABLE account means that you can save up money without losing your benefits. It also lets family and friends give you money without affecting your benefits.

Note: When you die, if your estate goes through probate the money in your ABLE Account might be used to repay certain types of Medi-Cal expenses. Learn more about Medi-Cal Estate Recovery.

Opening an ABLE Account

There are a few main rules for opening an ABLE account:

• You can only open an account through a state-designated program or institution.
  • California's ABLE account program is CalABLE.
  • You can choose to open an account in another state’s ABLE program.
• You can only open one ABLE account. (You cannot open accounts in more than one state.)
• You must have a disability that qualifies for an ABLE account and that began before you turned 26.
  • You can be more than 26 years old when you open your account – all that matters is when your disability began.

You can only have an account if you have a disability. However, another person, such as a parent or guardian, can help manage the account.

Comparing State ABLE Programs

Some states offer ABLE accounts and others don’t. California's ABLE account program is CalABLE. Even if your state has an ABLE program, you should compare different state ABLE account programs to see which state’s program is best for you.

When you compare ABLE programs, think about these questions:

• How easy is it to put money in the account and take money out for qualifying expenses? For example, does it come with a debit card?
• How good is customer support? Try calling the program to see whether it seems helpful.
• What investments does it offer? Each state program offers different investment options. Choose a program that offers investments matching your needs.
• What fees does the program charge? There may be fees for opening the account and for keeping money in it.
• Does the program offer any extra benefits for people living in your state? For example, some state programs offer extra tax benefits for residents of that state.

Note: You can switch your ABLE account from one state program to another. You do not have to stick with the state program you choose.

Compare the ABLE account options in different states.

Rules on Depositing Money in an ABLE Account

There are two limits on how much can be put in an ABLE account in a calendar year:

• Up to $17,000 from any source (including your family and friends, your benefits, and other unearned income)
• Another $13,590 from your own earned income (if you have a job).
  • Note: If you or your employer make contributions to a retirement plan set up by your employer, you might not qualify for the extra ABLE contribution amount based on having a job (you can still make regular ABLE contributions). If you aren't sure about this, ask your ABLE account program or check with a tax expert. Get more information about this rule from the ABLE National Resource Center.

Note: This means that if you earn $13,590 or more, you could have a total of up to $30,590 go into your ABLE account in a year. If you earn less than $13,590, the amount you could contribute would be lower.

Important: You need to keep good records, to make sure that too much money isn’t put into your account.

State ABLE programs also have limits on the total amount in your account — typically $200,000 to $500,000, depending on the state. For example, a state program might say that if you have $400,000 in your ABLE account, you cannot deposit any more money.

Rules on Spending Money in an ABLE Account

The money in an ABLE account has to be used for certain qualifying expenses, like:

• Daily living expenses
• Education
• Housing
• Transportation
• Help getting and keeping work
• Health care
• Assistive technology
• Legal fees
• Financial management fees, and
• Other approved expenses.

Many expenses qualify. For example, your rent, electric bill, and furniture are housing expenses. Gasoline and car repairs are transportation expenses. Health insurance premiums and copayments count as health care. Lunch at a restaurant, toothpaste, and toilet paper are daily living expenses.

Keep receipts whenever you use your ABLE account to pay for a qualifying expense. If you are audited by the IRS, you’ll need to show them how you’ve used your money. You can put all of the receipts into a binder or scan them and save them on your computer.

How Spending Works

An ABLE program may offer a debit card that is linked to the account. If so, you can use the debit card whenever you pay for a qualifying expense. For things like rent, you may need to write checks or withdraw cash from the account instead. You don't need authorization to spend your money: it's your job to make sure your expense qualifies and to keep records of how use your ABLE account.

If you withdraw cash from an ABLE account, spend it on your qualifying expense. Don’t just hold onto the money or put it in a normal bank account – if you don’t spend the money, it could be counted as a resource for benefits programs. For example, if you take $3,500 out of an ABLE account and put it into a regular checking account instead of spending it, you will go over the resource limit for SSI.

As long as the money stays in the ABLE account, it won’t affect your benefits, so leave your money there until you need to spend it.

Learn more about ABLE accounts.

Individual Development Accounts, also known as “IDAs,” are special savings accounts. You choose a goal to save for and use the IDA account to save money towards meeting that goal. IDA goals are usually buying a first home, education or training costs, or funding for a small business.

The money you put into the account will be matched by other sources. The match may be anywhere from one to four times the amount of the deposit you make. For example, if you’re enrolled in an IDA program with a 2:1 match and you deposit $50 into your account, the program will add an additional $100 towards your savings goal.

There are more than 250 IDA programs nationwide. Their eligibility requirements can be different. Generally, to qualify for an IDA:

• Your annual income must be within 200% of the Federal Poverty Level ($29,160), and
• You must have some form of earned income.

Once you’re enrolled in the program, you also need to take financial education classes.

To research and find an IDA program in California, check out the DB101 list of IDA resources and the Prosperity Now IDA directory.

Funding Sources

Funding for IDAs comes from a variety of places, including government agencies, private companies, non-profits, and individual people.

If you are getting Supplemental Security Income (SSI) and/or Medi-Cal benefits and plan to enroll in an IDA, it is very important that you find out the funding source for that IDA program:

• If you enroll in a nonfederally funded IDA (for example, one funded by a nonprofit or private company), money deposited and matched in your IDA may put your SSI or Medi-Cal benefits at risk.

• But if you enroll in an IDA program that is federally funded through Temporary Assistance for Needy Families (TANF) or the Assets for Independence Act (AFIA) block grants, money deposited won't be counted as a resource and a portion of it will be excluded from income for SSI or Medi-Cal.

If you are on SSI or Medi-Cal, it is highly recommended that you enroll in a TANF or AFIA funded IDA, rather than one funded by some other source, so that you don’t risk losing your benefits.

Program Eligibility

Each IDA program is different and eligibility requirements may vary from program to program. Most require that:

• Your annual income is within 200% of the Federal Poverty Level ($29,160 for an individual, $39,440 for a couple), and

• You have earned income.

For an AFIA- or TANF-funded IDA, you must have income from work. It doesn’t matter if you’re working full-time or part-time, but you must be earning income from some sort of job. IDAs that are funded by other sources may have slightly different earned income requirements and allow for income from other sources.

Citizenship Requirements

IDA programs funded by the federal government may check on your citizenship or legal residency status when you apply. IDA programs funded by other sources may or may not do this. Be sure to ask about specific citizenship requirements when looking at IDA programs.

Financial Literacy Training

Once you’re enrolled in an IDA program, you must take their free financial literacy training. Financial literacy programs improve your ability to manage your personal finances, save more money, and do financial planning.

This training usually covers topics like:

• Money
• Debt reduction
• Developing a savings plan
• Credit, and
• Investing.

IDA Savings Limit

Most IDA programs only let you save a limited amount of money in your account, usually $4,000 to $6,000. This includes the money you deposit, as well as the matching funds. Once you reach the limit, you won’t be allowed to deposit any more money into the account. IDA programs also have a limit on how long you can save, usually 2 or 3 years.

How to Apply

If you are interested in starting an IDA, contact an IDA program in your area, search the Prosperity Now IDA directory. Ask if the IDA program you are interested in is accepting applications. Some programs may have waiting lists. Even if they do, you may be able to start by taking financial literacy training while waiting for a space to open up. You can also look at the DB101 list of IDA resources. There aren't as many IDA programs as there used to be. Some are still active, but it can take a bit of effort to find one that is accepting applications.

Note: There aren't as many IDA programs as there used to be. Some are still active, but it can take a bit of effort to find one that is accepting applications.

Once you find an IDA program that fits your needs, you should go to an orientation meeting to learn more about it.

You will also need to provide information to prove your eligibility for the program. If you get into the program, you will have an IDA caseworker who will help with your account. You’ll open a savings account with a bank or credit union that is connected to your IDA program. Depending on the program, you may need to deposit a certain amount into your account each month.

Once you’ve reached your savings goal, you can take money out of the account to spend on your goal.

Integration with Other Benefits Programs

IDAs, Supplemental Security Income (SSI), and Medi-Cal

Because SSI and Medi-Cal have income and asset limits, working and saving money in an IDA account could risk your eligibility for those programs. Be sure to find out about the funding source before you enroll in a certain IDA:

• If you enroll in an IDA program that is federally funded via Temporary Assistance for Needy Families (TANF) or the Assets for Independence Act (AFIA), you don’t need to worry about losing your benefits. Money deposited won't be counted as a resource and a portion of it will be excluded from income for SSI or Medi-Cal.
• If you enroll in an IDA program that is funded by some other source, money deposited into your IDA may be counted as a resource and you could lose your SSI and Medi-Cal benefits.

If you are on SSI and Medi-Cal, you should enroll in an AFIA- or TANF-funded IDA.

IDAs and Plans to Achieve Self-Support (PASS)

A Plan to Achieve Self-Support (PASS) is an SSI program that lets you set aside money for a specified work goal, such as:

• Starting a new career
• Going back to school

The money you set aside in a PASS does not count against SSI's income and resource limits. This means you can save money towards a career goal in a PASS and continue to use SSI benefits for basics like food and rent.

An IDA can be a part of your PASS plan; the only requirement is that your goal for each program be the same. One of the benefits of using the 2 together is that it lets you to set up a non-federally funded IDA without risking your SSI or Medi-Cal benefits.

As long as the money you save in your IDA is part of a PASS plan, it will not be counted by SSI or Medi-Cal and won’t jeopardize those benefits.

IDAs and Social Security Disability Insurance (SSDI)

People on SSDI can enroll in any IDA program they choose. There are no restrictions.

One thing to consider though, especially if you’re using an IDA to fund a small business: As your earned income increases, and particularly as you start earning above Social Security's Substantial Gainful Activity (SGA) level ($1,470/month for individuals in 2023), SSDI’s work rules will apply and your SSDI benefit may be affected. For details on how working can affect your SSDI, read DB101’s section on SSDI and Work.

IDAs and the Earned Income Tax Credit (EITC)

The Earned Income Tax Credit (EITC) is a federal tax program that lowers the amount of income tax owed by low- to moderate-income workers and families. Money you get from an EITC can be put into an IDA and matched, helping you to reach your savings goal faster.

Plan to Achieve Self-Support (PASS)

Social Security’s Plan to Achieve Self-Support (PASS) program lets you save money without lowering your income. Usually, if you get SSI monthly cash benefits, your SSI benefits go down when you get income from other sources, like a job or Social Security Disability Insurance (SSDI).

If you are in this situation, you probably have to spend a lot of your monthly income on basic expenses like food and housing. This can make it hard to save for things like job training or school.

The PASS program helps make saving easier. It lets you save money for a work-related goal that will help you achieve self-sufficiency. It is easy to use because it protects your income while you save.

You can use a PASS to:

• Help pay for the cost of school or training
• Start a business
• Pay for equipment, support services, and other expenses related to your goal

One of the things that make PASS unique is that it is completely consumer-driven. The PASS plan is about your work goal, what you want to achieve, and what you need to get there.

After you write your PASS, you ask Social Security to approve it. Your plan has to have a realistic goal given your abilities, experience, and educational background.

Income Sources for Funding a PASS

Once you have an approved PASS plan, you will put money into your PASS account to pay for each step along the way to reaching your goal.

You cannot put any money you get from SSI in your PASS account. You must use money from some other source such as income from a job, or money from a spouse or parent.

Applying to the PASS Program

There is a detailed description of how to set up a PASS in the DB101 PASS section. You have to fill out Social Security’s PASS application form. On the application you will describe your goals for work and how you plan to achieve them.

This description should be detailed enough to convince Social Security that:

• You have a clear plan
• The plan is something you can realistically do, and
• If you completed the plan your need for SSI or SSDI would be lowered or eliminated.

Application Assistance

Creating your plan and filling out a PASS application can seem intimidating, but you can get help with every step of the process by talking with a PASS Cadre. A PASS Cadre is a professional who knows about the program and is available to help you take advantage of it. To find a PASS Cadre, click here.

Using a PASS

After your plan is approved, Social Security will send you detailed instructions about how to use your PASS. The instructions are mostly about keeping pass funds and expenses separate from your other money, and keeping good records. You have to follow the rules carefully. To learn more, see DB101's PASS section.

If a medical situation or some other issue comes up that impacts your ability to continue your PASS, talk to your PASS Cadre about your options. In many cases, you will be allowed to put your PASS plan on hold for up to 12 months without having to reapply.

Family Self-Sufficiency (FSS) Program

The Section 8 Housing Choice Voucher Program helps people with low income have affordable housing. It is funded by the federal government and run by local public housing authorities (PHAs).

A family that gets Section 8 benefits pays 30% of the family income for rent. The Section 8 program pays for the rest of the rent. After a family's income goes up, the amount the family has to contribute to rent also goes up, because 30% of their income is more than it used to be. When the family contributes more for rent, the Section 8 program contributes less. Note: Families that include a person with a disability who works may qualify for the Earned Income Disregard and not have to pay more rent (see below).

Section 8's Family Self-Sufficiency (FSS) program helps families whose income goes up. When the family income goes up and the Section 8 program starts paying less for rent, the Section 8 program takes the money that it saves on rent and sets it aside for the family. The family can use these savings for purchases, such as the down payment on a home or a car.

Learn more about the FSSL. Find public housing authorities near you.

Earned Income Tax Credit (EITC)

The Earned Income Tax Credit (EITC) is designed to help people with low income by lowering the amount of federal income tax they owe. Even if you don’t earn enough money to owe federal income taxes, you may be able to get an EITC.

Note: There is also an Earned Income Tax Credit for California state income taxes. The California Franchise Tax Board has more information about the state EITC.

Eligibility

To qualify, you must have income from employment, self-employment, or employer-paid disability benefits that is below certain limits and you must file your federal taxes.

The amount you get from your EITC depends on your Adjusted Gross Income (AGI), whether you are married, and the number of children you have. For 2023 (filing taxes by April 2024), the EITC ranges from $2 to $7,430.

Earned Income

To qualify for an EITC, you must have earned income. This can include your wages, salaries, tips, net earnings from self-employment, or any other form of taxable pay. You can also elect to include nontaxable combat pay as earned income.

The EITC program considers employer-paid disability payments that you get before retirement earned income. But benefits payments from a policy you paid the premiums for, or that you got after retirement, would not be considered earned income.

Other things that do not qualify as earned income under the EITC include:

• Interest and dividends
• Social Security and railroad retirement benefits
• Pensions and annuities
• Alimony and child support
• Workers’ compensation benefits
• Unemployment compensation
• Welfare benefits
• Veterans benefits

If you are married and filing jointly, at least one spouse must have earned income to be eligible for an EITC.

Adjusted Gross Income and Qualifying Children

In addition to the earned income requirement, you must have an adjusted gross income (AGI) below certain levels to qualify for an EITC.

Your adjusted gross income (AGI) includes all earned income before deductions for taxes, health care or other expenses, minus certain business, education-related, and other expenses. While filling out your annual tax return (IRS Form 1040), you will be asked a series of questions that will let you determine what your AGI is.

For a child to be considered a qualifying child under EITC, several requirements must be met:

• Relationship: If you are claiming one or more child, they must be the taxpayer’s son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of these (for example, your grandchild, niece, or nephew).

• Residence: The child must live at the same residence as the taxpayer for more than half the year and have a valid Social Security number.

• Age: At the end of the tax year, the child must be under 19. Or, if going to school full-time, the child must be under 24. The only exception is for people who are permanently and totally disabled. If the taxpayer’s child is permanently and totally disabled, there is no age requirement.

According to the IRS, a person is considered “permanently and totally disabled” if their condition is expected to last continuously for at least one year or is expected to result in death, and if they cannot perform any Substantial Gainful Activity (SGA). For tax year 2023, this means they cannot work and earn more than $1,470 per month ($2,460 if you are blind).

Note: Qualifying children can only be used by one family member to claim an EITC.

How to Get an EITC

If you qualify, you will claim your Earned Income Tax Credit when you file your federal tax return, IRS Form 1040. If you have a qualifying child, be sure to attach a Schedule EIC.

To calculate the value of your EITC, you can use the Earned Income Credit Worksheet in your 1040 instruction booklet. Or you can ask the IRS to calculate it for you by noting an “EIC” on the Earned Income Credit line on your tax return.

To figure out whether or not you are eligible for an EITC, and to see what the value might be, use the IRS EITC Assistant.

Tax Preparation Tips for Claiming the EITC and Advanced EITC

Keep all your W-2's and keep a record of who you have worked for during the year. This will make things simpler when it comes time to file your taxes.

If you are on a limited income, do not pay someone to do your taxes. Instead, use a Volunteer Income Tax Assistance (VITA) Center to file. Most centers can e-file your return for free. If you are self-employed, have all your receipts and a log of expenses ready for the tax preparer.

Be sure to file your taxes, even if your income is lower than the amount at which you are legally required to file. You might be eligible for an EITC or some other tax credit that you can’t get without filing. Many families with children who qualify for an EITC may also be eligible for a Child Tax Credit (CTC).

The following is a summary of the EITC requirements:

Interaction With Other Disability Benefits Programs

Supplemental Security Income (SSI), and Social Security Disability Insurance (SSDI)

You must have some form of earned income to qualify for an EITC. Social Security benefits do not count as earned income under the program. You can, however, be on SSI or SSDI and claim an EITC, as long as you have some form of earned income.

Individual Development Accounts (IDAs)

Money from an EITC can be put into an Individual Development Account (IDA). This lets you get matching funds from the IDA program sponsor.

Plans to Achieve Self-Support (PASS)

Money from an EITC can be set aside in a PASS. This will let you reach your employment goals more quickly, by saving money without affecting the way your income is counted.

Long-Term Disability Insurance

Employer-paid long-term disability insurance benefits that you got before retirement count as earned income under EITC and can therefore be used to qualify for the program. Disability insurance benefits which you pay the premiums for, or that you get after retirement, are not considered earned income and can’t be used to qualify for an EITC.

Volunteer Income Tax Assistance Program (VITA)

The IRS Volunteer Income Tax Assistance Program (VITA) offers free tax help for taxpayers who qualify.

The VITA Program offers free tax help to low- to-moderate income (generally, $60,000 and below) people who can’t prepare their own tax returns. Certified volunteers are available to help prepare your taxes and they will make sure you get special credits, such as Earned Income Tax Credit, Child Tax Credit, and Credit for the Elderly or the Disabled. In addition to free tax return preparation assistance, most sites also offer free electronic filing (e-filing).

VITA sites are generally located at community and neighborhood centers, libraries, schools, shopping malls, and other convenient locations. To locate the nearest VITA site, visit this website or call 1-800-906-9887.

Child Tax Credit (CTC)

The Child Tax Credit (CTC) is available to parents with children under age 17. CTC can give these parents up to $2,000 tax credit for each child in the family under 17. Eligible families must be working and earning at least $2,500 a year.

Other Programs

If you or your spouse is a U.S. citizen who received taxable disability income and was permanently and totally disabled during this tax year, you may be eligible for the Credit for the Elderly or the Disabled.

A guide to other employment supports for people on SSI is available here.

A Special Needs Trust (SNT), sometimes called a Supplemental Needs Trust, is a legal arrangement in which a person or organization (like a bank) manages assets for a person with a disability. The person with the disability is called the “beneficiary” and the person who is managing the assets is the “trustee.” Many kinds of assets can be put into a trust, such as cash, stocks, bonds, and real estate.

An SNT provides for the needs of a person with a disability without losing or reducing their benefits such as Supplemental Security Income (SSI), Medi-Cal, In-Home Support Services (IHSS), and HUD housing assistance. Assets in an SNT won’t be counted toward the SSI, Medi-Cal and IHSS asset limits.

Note: The rules for setting up trusts can be complicated and it is important to make sure that you seek out good advice about how to set one up in order to avoid serious problems.

If you get public benefits such as SSI, Medi-Cal, IHSS, and HUD housing assistance, the SNT must say that:

• It is up to the trustee when and how to use the funds to benefit the beneficiary
• The main purpose of the trust is to supplement the support and services the beneficiary gets from public benefits, and
• The beneficiary cannot sell or give away her rights under the trust to anyone else and has no control of the assets.

These three statements will usually keep the assets in the SNT from being counted against your eligibility for public benefits. It is also important to know that the assets in the SNT must not have belonged to you before the trust was set up (except for a First Party SNT – see Three Types of Special Needs Trusts). This means that you cannot use the SNT as a savings account. You cannot put your own money into most SNTs. If someone you know wants to leave assets for you in their will, they must state the name of the SNT in their will, not your name.

While public benefits such as SSI, Medi-Cal, IHSS, and HUD housing assistance provide basic support for food, shelter and medical care, a Special Needs Trust can be used to add support and services in the ways most helpful to you. For example, money from the trust could be used to pay for your recreation, telephone bill, education, and vacations. The money in an SNT cannot be used for food or shelter; that is what your SSI money is for.

How does money from the SNT affect your SSI payments?

• Money paid directly to providers for items other than your food and shelter will not reduce your SSI payments.
• If money is paid directly to a provider for food or shelter, your SSI payment will be reduced, but only up to a certain limit.
• Money paid directly to you will reduce your SSI payment.

A good way for people to give you assets, such as money, but not affect your public benefits (SSI, Medi-Cal, IHSS, and HUD housing assistance), is to give the assets to the SNT. If someone simply gives you money directly, that gift might result in a loss or reduction in the amount of your SSI checks, Medi-Cal benefits, IHSS funding, and HUD housing assistance. This will happen if that money will cause you to have more than the asset limit you can have for these programs. Also, if you have a disability and you inherit money or get a settlement in a court case, those funds can also cause your SSI, Medi-Cal, IHSS and HUD housing assistance to be affected unless that money is placed directly into a First Party SNT (see Three Types of Special Needs Trusts).

Although SNTs can have huge advantages, they also have strict rules. The funds must be used to benefit only you; no one else can benefit from that SNT. Also, the trust is set up to help you, but no payments can be made directly to you. When you need to pay a provider for something that is not food or shelter, the trustee will pay the money from the SNT directly to the provider. Only the trustee can handle the money from the SNT.

Three Types of Special Needs Trusts

Third Party Special Needs Trusts

Parents usually set up and provide the money for Third Party Special Needs Trusts, often through their will, and sometimes by purchasing life insurance payable to the trust. Other family members can also put money in this type of SNT, such as grandparents, aunts, and uncles. The only person who cannot place money into this type of trust is you, the person with a disability.

Some parents place their property in a "living" trust and state in that trust that a separate SNT for their disabled child is set up. This type of SNT becomes effective immediately and is a good idea for families where aunts, uncles, and grandparents might want to leave money to the SNT. Anyone can give money to the SNT by either writing a check or writing a will naming the SNT as the beneficiary.

Note: You do not want your relatives giving money directly to you as this may lower or stop your SSI, Medi-Cal, IHSS, and HUD housing assistance.

The key to a Third Party SNT is that the money cannot be used for housing or food. Housing and food are considered "basic needs" under Social Security laws. If you are getting free housing or food from someone else, including a family member or an SNT, then there will be a penalty and your public benefits will be lowered or stopped. This is why you don’t want to use assets from the SNT for housing or food.

When creating the Third Party SNT, you must decide who will get any assets that are left in the SNT after you die. Unlike other SNTs, the Third Party SNT does not need to repay the government for any Medi-Cal expenses.

First Party Special Needs Trust

A First Party SNT is used if you have accumulated many assets, inherited assets, or received assets from a court settlement. (In these situations, you actually own the money, so the funds cannot be put into a Third Party Special Needs Trust.)

It used to be that people with disabilities were not allowed to set up their own First Party SNT, even though it was their own money. A parent, grandparent, guardian, or court had to set up the trust, the trustee controlled the funds, and you could not be your own trustee. The laws changed in 2016, and this type of trust can now be set up by you, or by your parent, grandparent, legal guardian, or the court.

To qualify, you must be under 65 years old and must have a disability as defined by Social Security. If you are not disabled enough to qualify for Social Security, you cannot have this type of SNT.

The SNT has to specify that after you have died, any assets left in the SNT must be used to pay back the government for what they paid in Medi-Cal for you after the SNT was set up.

Pooled Special Needs Trust

This type of trust pools assets from different people and puts them into a large investment fund. Although the funds are pooled (used together), you still have your own separate account. Pooled Trusts offer both First Party accounts (funded with only your own money) and Third Party accounts (funded only with money from other people). As with a First Party SNT, all beneficiaries of a Pooled SNT must have a disability that meets Social Security's standards.

A Pooled SNT is set up through a nonprofit organization. The nonprofit organization will administer the Pooled SNT, take care of all the tax preparation, make investment decisions, and act as the trustee.

Before the Pooled SNT is set up, you and/or your family members must explain what you want the trust to pay for, and who should be consulted about these matters. Anyone can put money into the Pooled Special Needs Trust for you - parents, grandparents, even you.

Who can set up a Pooled Special Needs Trust?

• You
• Your parent
• Your grandparent
• Your legal guardian
• The court

Any money left in the Pooled SNT after you die will be used to pay back the State Department of Health Care Services for the amount of money they spent on Medi-Cal for you after the trust was set up. If money is still left over, it can be given to whomever you tell the trustee you want it to be given.

Trusts are a complicated but important issue. If you have questions about trusts you can find additional resources or an attorney in your area at the Special Needs Alliance.

For information about Special Needs Trust and SSI eligibility click here.