The short answer depends entirely on how you leave it — and getting the structure right changes everything.
The short answer is: it depends on how you leave it. If you leave money directly to a child who receives Supplemental Security Income (SSI) or Medicaid, you can disqualify them, because those programs cap the amount a person can own at just $2,000. But if you leave that same money through a properly drafted third-party special needs trust, your child keeps both the inheritance and their benefits. The dollar amount is rarely the problem. The structure is everything.
SSI and Medicaid are "means-tested" programs, meaning eligibility depends on having very limited income and assets. The Social Security Administration defines a "resource" as anything a person owns that could be converted to cash and used for food or shelter — including cash, bank accounts, and most inheritances.
In 2026, the countable resource limit is $2,000 for an individual and $3,000 for a couple. The moment a child's countable resources exceed that limit, they become ineligible for SSI for that month — and because SSI eligibility usually triggers Medicaid enrollment, a loss of SSI often means a loss of Medicaid too. For a person who relies on Medicaid for medical care, therapies, and long-term services, that can be worth far more than the inheritance itself.
Less than most parents expect. Because the limit is only $2,000, even a modest inheritance — a few thousand dollars from a grandparent, a life insurance payout, or a legal settlement — can be enough to interrupt benefits. The size of the gift does not determine whether benefits are lost; the fact that the child personally owns it does.
This is why special needs attorneys almost universally advise against leaving any inheritance directly to a child with a disability, no matter how well-intentioned the gift.
A third-party special needs trust (sometimes called a supplemental needs trust) is a legal arrangement that holds assets for the benefit of your child without your child owning them outright. Because the child has no direct control over the trust's assets, those assets are not counted toward the SSI or Medicaid resource limit.
The trust can then pay for things that improve your child's quality of life beyond what government benefits cover — therapies, education, travel, technology, personal care, and more — all while preserving eligibility.
A key advantage of a third-party trust, funded with a parent's or relative's money rather than the child's own, is that it is not subject to Medicaid "payback" when the child passes away. Whatever remains can go to other family members you choose. (A first-party trust, funded with the child's own money such as a settlement, does require Medicaid reimbursement — which is why the distinction matters.) These trusts must be drafted by a qualified special needs or estate planning attorney. This is not a do-it-yourself document.
ABLE accounts are a newer, simpler tool that works alongside a trust. The first $100,000 held in an ABLE account is excluded from the SSI resource limit, and the funds grow tax-free when used for qualified disability expenses.
As of January 2026, eligibility expanded significantly: a person can now open an ABLE account if their disability began before age 46 (the prior cutoff was 26). For many families, the right approach is to use both — an ABLE account for everyday and near-term expenses, and a special needs trust for larger, long-term funding.
Two mistakes account for the majority of accidental benefit losses:
Both are preventable with coordinated planning between your attorney and the rest of your advisory team.
A special needs trust is only as useful as the money inside it. An empty trust protects nothing. Families fund trusts in several ways — savings, investments, the proceeds of the family estate, and very commonly, life insurance, because it can deliver a meaningful sum to the trust at exactly the moment it is needed: when a parent passes away.
The questions worth working through with your team are how much your child will actually need over a lifetime, what is already covered by benefits, and how to close the remaining gap. That is the heart of long-term special needs planning.
If you take one thing away, let it be this: do not leave money directly to your child with special needs. Talk with a qualified special needs attorney about establishing a third-party trust, make sure every beneficiary designation points to that trust rather than to your child, and build a plan to fund it.
At Special Legacy, we work alongside your attorney, financial advisor, and CPA to focus on that funding piece — making sure the plan they build for your child is actually paid for.
The biggest risk for most families isn't having too little money. It's having money reach your child in a way that quietly dismantles the benefits keeping them secure. A few structural decisions, made early, prevent it entirely.
Our free Care Cost Calculator estimates your child's lifetime care costs and shows you the funding gap — a clear, no-pressure place to begin.
Estimate Care CostsThis article is for educational purposes only and is not legal, tax, or financial advice. Eligibility rules and dollar figures change and vary by state. Please consult a qualified special needs attorney and your advisory team about your family's specific situation.