Indiana Medicaid: Disabled Child's Future: An Inheritance Trap?

What Happens to My Child When I Am No Longer Here?

This is one of the most common questions I hear from families. You have worked hard your entire life to provide for your loved ones. You have saved money, bought life insurance, and plan to leave an inheritance to give your child with a disability the best life possible. But a simple, loving act like naming your child in your will can create unexpected and serious problems.

The transition into adulthood often reveals these planning gaps. Many of the government benefits that provide healthcare, housing, and support are means-tested. This means your child must have very limited income and assets to qualify.

Understanding the Resource Limit

For Supplemental Security Income, or SSI, the countable resource limit for an individual is generally $2,000. It is critically important to understand this number. An inheritance of cash, investments, or life insurance proceeds paid directly to your child can easily push them over that limit.

This can create eligibility problems for their SSI cash assistance. Depending on the person’s specific situation and eligibility pathway, it may also affect other vital benefits like Medicaid. The goal of planning is not to hide money, but to structure your family’s assets so the inheritance you leave to help your child does not accidentally cause them to lose the foundation of their support.

A Framework for the Future

Thoughtful planning allows your resources to supplement, not replace, your child’s benefits. Here are the tools Indiana families can use to build that plan:

• A Third-Party Special Needs Trust is the cornerstone. Think of it as a protective container. You can leave assets—like an inheritance or life insurance proceeds—to this trust instead of directly to your child. The funds are managed by a person you choose, called a trustee, for your child’s benefit. Because your child does not own the assets in the trust, they generally do not count against their resource limits.
• An ABLE Account is a savings and investment account that can be an excellent companion to a trust. It allows a person with a disability to save money for qualified disability expenses without impacting their benefits, up to certain limits.
• Coordinated Beneficiary Designations are essential. Your will, life insurance policies, and retirement accounts should all name the Special Needs Trust as the beneficiary, not your child directly.
• A Trustee and successor trustee are the people you appoint to manage the trust. Choose them carefully.
• A Letter of Intent is not a legal document, but it is deeply important. It is your guide for future caregivers and trustees, explaining your child’s routines, preferences, and your hopes for their life.
• Finally, consider what level of support your child needs for their own decision-making, whether that involves powers of attorney, supported decision-making agreements, or guardianship.

For Indiana families seeking to understand these tools, SpecialNeedsTrustHelp.org provides free educational guides and resources. The information provided is for educational purposes and is not a substitute for legal or financial advice from a qualified professional.

Short-Form Video Script

If you’re a parent of a child with a disability, you’ve likely asked: what happens when I’m gone?

You’ve saved money and maybe have life insurance. But leaving it directly to your child could jeopardize their benefits.

For SSI, the asset limit is just two thousand dollars. A direct inheritance can easily push them over that limit, disrupting the very support system you worked to protect.

The solution is not to stop saving. It’s to plan.

A Special Needs Trust can hold an inheritance for your child's benefit, without counting against their resource limits. It ensures your legacy is a lifetime of support.

To learn how this works for Indiana families, visit SpecialNeedsTrustHelp.org for free guides to get you started.