You want to leave money to a child, sibling, or other loved one who receives SSI or Medicaid. Your goal is to make that person's life easier, but an inheritance left directly to them can affect eligibility for benefits that depend on income or financial resources.
That does not mean you should leave your loved one out of your estate plan. It means the way you leave the inheritance matters.
For New Jersey families considering special needs planning, questions about an inheritance and SSI benefits involve more than asking, "How much should I leave?" You also need to ask, "How should I leave it so the inheritance does not unintentionally interfere with the benefits my loved one relies on?"
Can an Inheritance Affect SSI Benefits?
Yes. An inheritance can affect Supplemental Security Income because SSI is a means-tested program with financial eligibility rules. In 2026, the countable resource limit is generally $2,000 for an individual and $3,000 for an eligible couple.
The Social Security Administration generally treats an inheritance as income in the first month it has value and can be used by the recipient. If inherited money or property remains available after that month, it can then be evaluated under SSI's resource rules. Whether a particular asset counts depends on what was inherited and the applicable exclusions.
That distinction matters in a very ordinary estate-planning situation. Suppose your will says that your three children will divide your estate equally, and one of those children receives SSI. If that child receives cash or other countable property outright, the inheritance can affect financial eligibility even though your intention was simply to provide additional support.
The best time to address that problem is generally before the inheritance passes directly to the beneficiary, while you are still creating or updating your estate plan.
Can an Inheritance Affect Medicaid in New Jersey?
It can, but the answer requires more care because "Medicaid" does not describe one single financial eligibility test.
New Jersey has several Medicaid programs for older adults and people with disabilities, and their income and resource rules are not identical. For example, Medicaid Only generally uses SSI financial standards, while other NJ FamilyCare programs and long-term services and supports apply different eligibility rules. An inheritance therefore needs to be evaluated in light of the specific Medicaid coverage the person receives.
This is also why you should not assume that a planning strategy that works for SSI automatically produces the same result for Medicaid. The Social Security Administration itself cautions that a trust or trust payment that does not count for SSI can still affect Medicaid eligibility under separate rules.
Before changing beneficiary designations or leaving assets outright, identify the exact benefits your loved one receives and the financial rules that apply to those programs.
Can You Leave an Inheritance in a Special Needs Trust?
For some families, a properly structured special needs trust allows assets to be held and managed for a person with disabilities without giving the beneficiary unrestricted ownership of assets that could otherwise affect means-tested benefits.
This can be especially important when a parent, grandparent, sibling, or other family member is using their own assets to provide for the beneficiary. A third-party special needs trust can be incorporated into the family's estate plan so that property passes to the trust rather than directly to the person receiving benefits.
The trustee then manages and distributes those assets according to the trust terms and applicable benefit rules.
This is different from simply writing a check to the beneficiary or naming that person to receive an unrestricted share of an estate.
At Cohler Law, special needs planning is not treated as simply choosing one document or trust. The trust has to work with the family's broader estate plan, the beneficiary's circumstances, the source of the assets, and the public benefits involved. One of the first questions is where the money will come from, because that helps determine what type of special needs trust should be considered.
What Is the Difference Between First-Party and Third-Party Special Needs Trusts?
The source of the money matters.
A third-party special needs trust generally holds money or property provided by someone other than the beneficiary, such as a parent or grandparent planning an inheritance.
A first-party special needs trust involves assets that belong to the person with disabilities. That situation can arise, for example, after the person has already received an inheritance outright, receives a settlement, or owns other funds that need to be considered as part of benefits planning.
First-party trusts are subject to specific federal and New Jersey requirements. New Jersey's Medicaid guidance addresses requirements including disability status, age restrictions on funding, sole-benefit provisions, and Medicaid reimbursement after the beneficiary's death for qualifying first-party special needs trusts.
If you are planning to leave an inheritance to a loved one who receives means-tested benefits, one important question is whether the inheritance should pass to a third-party special needs trust rather than directly to that person.
Do Life Insurance and Retirement Beneficiary Designations Matter Too?
Yes. A carefully drafted will does not solve the problem if another asset passes directly to the beneficiary outside the will.
For example, a parent might create a special needs trust in the estate plan but still name the child individually as the beneficiary of a life insurance policy, retirement account, or other asset with its own beneficiary designation.
That can undermine the intended structure because those assets generally pass according to the beneficiary designation rather than simply following the distribution language in the will.
Special needs planning should therefore include a review of how major assets are titled and who is named to receive them, not just the wording of the will or trust.
Can a Special Needs Trust Pay for Anything the Beneficiary Needs?
Not necessarily.
Having a properly structured trust is only part of the analysis. How the trustee makes distributions can also affect benefits.
For SSI, for example, cash paid directly to the beneficiary can reduce the SSI payment. Trust payments for shelter can also affect SSI, while payments for many other goods and services are treated differently. SSA's current 2026 trust guidance specifically distinguishes among these types of trust distributions.
New Jersey Medicaid also imposes rules on certain special needs trusts and their administration. The state's guidance emphasizes that trust funds must be used consistently with the trust's requirements and applicable Medicaid rules.
That is why choosing the trustee matters. Before making cash payments to the beneficiary or paying shelter expenses, the trustee needs to understand how the payment will be treated under the beneficiary's SSI rules and whether separate Medicaid requirements apply.
What Should You Review Before Leaving an Inheritance to Someone Receiving Benefits?
Start with your loved one's actual circumstances rather than assuming that every person with a disability needs the same trust.
Consider:
- Which benefits does your loved one currently receive?
- What income and resource rules apply to each benefit?
- What assets are you planning to leave?
- Will those assets pass through your will, a trust, or a beneficiary designation?
- Who should manage the inheritance?
- Does the person already own assets of their own?
- Who will understand the beneficiary's needs and make appropriate decisions after you are gone?
Those answers help determine whether a special needs trust fits the plan and, if so, what type of structure should be considered.
They also help prevent a common planning disconnect: creating a trust in one document while leaving another account, insurance policy, or inheritance directly to the beneficiary.
Plan an Inheritance Around Your Loved One's Needs With Cohler Law
Leaving an inheritance to someone with special needs is not simply about transferring money. It is about deciding how those assets can support the person over time without unnecessarily disrupting benefits or services that are already part of their financial and care plan.
For families in Voorhees and throughout South Jersey, including Burlington, Camden, and Gloucester Counties, that can mean coordinating wills, trusts, beneficiary designations, trustees, and public-benefit considerations before an inheritance is ever received.
At Cohler Law, we help New Jersey families coordinate special needs planning around the person they want to support, the assets they intend to leave, and the benefits that need to be considered. If your estate plan currently leaves assets directly to a loved one who receives SSI, Medicaid, or other means-tested assistance, reviewing that plan can help identify whether a different structure is appropriate.
Contact Cohler Law to schedule a consultation and discuss special needs planning for your family.
Disclaimer: This article is for general informational purposes only and does not constitute legal advice. SSI, Medicaid, trust, and inheritance rules depend on the specific benefit program, trust structure, source of assets, distributions, and individual circumstances. Reading this article does not create an attorney-client relationship with Cohler Law.