Indiana Medicaid: Disabled Child Inheritance: The Hidden Benefit Trap

Of all the questions parents ask me, one comes up more than any other. It’s a question that lives deep in the heart. *What happens to my child when I am no longer here?* For Indiana families raising a child with a disability, this question carries a unique weight. You work hard, you save carefully, and you do everything possible to build a safe and happy life for your child. But as they transition into adulthood, a new set of rules comes into play that can catch even the most prepared families by surprise. This is often when families first encounter the strict financial limits of programs like Supplemental Security Income (SSI) and Medicaid. These programs provide a critical foundation of support—monthly income, health coverage, and access to services—but they are means-tested. Here is a fine-print issue that is important to understand early: to receive SSI, an individual generally cannot have more than $2,000 in "countable resources"—things like cash, bank accounts, or investments they can access. This is where a family’s loving intentions can create an accidental crisis. Let’s imagine you’ve named your adult child as the direct beneficiary of your life insurance policy or your retirement account. Or perhaps you’ve written a will leaving them a portion of your home’s value or your savings. You see it as a final gift of love and security. But if that inheritance is more than $2,000, it can push your child over the resource limit. An inheritance meant to help could instead cause a loss of their SSI income. It may also create problems for their Medicaid eligibility or other benefits tied to those financial rules. The system can feel confusing and unfair, but please know this: you are not helpless, and there are well-established, thoughtful ways to plan. The goal is not to hide money. It is to structure your family’s assets so they can enrich your child's life without disrupting the essential benefits they rely on. Here are the tools families in Indiana can use to build a secure future. ### The Cornerstone: A Third-Party Special Needs Trust Think of this as a protective container for the inheritance you want to leave. Instead of leaving money or property directly to your child, you leave it to this trust for their benefit. Because the trust owns the assets—not your child—the funds inside it do not count against their $2,000 resource limit. A person you choose, called a **trustee**, manages the money and uses it to pay for things that enhance your child’s quality of life. This could be anything from a new winter coat or a vacation to specialized therapy or a wheelchair-accessible van—things that public benefits don't cover. When you set up the trust, you will also name a **successor trustee**—someone to take over if the first trustee can no longer serve. Choosing these people is one of the most important decisions you will make. ### A Powerful Partner: The ABLE Account An ABLE account is like a tax-advantaged savings account for people with disabilities. Money in an ABLE account can be used for a wide range of qualified disability expenses. For families, this is a wonderful tool to use alongside a special needs trust. In fact, money from a special needs trust can be used to fund an ABLE account. A person can have up to $100,000 in an ABLE account without it affecting their SSI eligibility, and they often have more direct control over these funds for daily expenses. ### Making Sure Everything Works Together A trust is only effective if your assets are directed to it. This is a simple but critical step many people miss. You must update the **beneficiary designations** on your life insurance policies, retirement accounts, and savings accounts. Instead of naming your child, you will name the "Trustee of the [Full Name of the Trust]." Your will should also be coordinated to pour any remaining assets into the trust. ### Guiding the Future: The Letter of Intent While a trust provides the financial structure, a Letter of Intent provides the human guidance. This is not a legal document, but it may be the most important part of your plan. It is your instruction manual for future caregivers and your trustee. In it, you can describe your child’s daily routines, their medical needs, what they love, what they fear, who their friends are, and your hopes for their future. It ensures that the people who step in to care for your child truly know them. ### Supporting Their Decisions As part of your plan, you should also consider what legal tools your child may need to manage their own affairs. Depending on their abilities and preferences, this could include a **Power of Attorney** for finances and healthcare, a **Supported Decision-Making Agreement** to help them process information and make their own choices, or in some cases, a **guardianship**. Planning for a future you won't be in is one of the hardest things a parent can do. But taking these steps is a profound act of love. It ensures that your life’s work continues to protect and provide for your child, long after you are gone. To learn more and find free guides and planning tools, Indiana families can visit **SpecialNeedsTrustHelp.org**. The site provides educational information to help you understand your options and prepare the right questions for the legal and financial professionals you will need on your team.