While the number of seniors in poverty has trended slightly down over the past 5-10 years,[1] millions remain below the poverty line. These people rely on government assistance such as Medicaid and Social Security benefits to survive. More than 7 million over the age of 64 are receiving services through Medicaid,[2] while nearly 2.5 million receive Supplemental Security Income (SSI) benefits.[3]

Both SSI and Medicaid are means-tested, which means the individual must keep their income and/or assets below a certain level in order to remain qualified. SSI is administered at the federal level by the Social Security Administration and is automatically available to those over 65 who meet financial qualifications. Those who qualify for SSI receive a check every month up to the Federal Benefit Rate ($783 for an individual in 2020[4]). Medicaid is a healthcare benefit administered by states. Qualifications and programs vary but all states have an income and/or asset test. Benefits such as Medicare, Social Security Disability, and Social Security Retirement are entitlement benefits, which are not means-tested and have no financial qualifications.

The bottom line is that an influx of cash, such as a personal injury settlement or inheritance, will disqualify someone from SSI and/or Medicaid if no actions are taken. Depending on the size of the settlement, the client may not have a problem losing SSI; however, Medicaid eligibility is tied to SSI eligibility in some states and is often a critical benefit needed for primary health care. Private healthcare coverage is costly, particularly if the client needs skilled nursing care. Since Medicare does not have a skilled nursing care benefit, Medicaid may be the only option for getting this service in a cost-effective manner.

What are the client’s options?

  1. Pooled Special Needs Trust

In situations with a disabled[5] client who has SSI and/or Medicaid, we look first to special needs trusts (SNTs), regardless of age. This is a type of trust authorized by federal law to serve as a shelter for funds that would otherwise disqualify the person from government benefits.[6] The trust is administered by a trustee who is authorized to make distributions for excluded resources (items and services that that will not be counted Social Security and/or Medicaid). What is excluded depends on the program. For a client with Medicaid, this includes a broad range of items and services (including alternative therapies) so long as they are not covered by Medicaid. For a client with SSI, purchases of food and shelter items will trigger a reduction in the client’s SSI check. Purchases of these items are generally avoided by trustees, but exceptions can be made in situations where the benefit outweighs the reduction.

There are two kinds of special needs trusts which can be funded with a personal injury settlement: standalone (AKA “d4a trust”) and pooled (AKA “d4c trust”). A standalone SNT is a trust created for one individual. A pooled SNT is one that many people can join. The funds of those who join a pooled trust are “pooled” for investment purposes, but each sub-account is maintained and administered separately.

You may have heard that special needs trusts are not available to people 65 and over. There is some truth in this statement. People 65 and over are prohibited from creating standalone SNTs, but they can still join pooled SNTs. However, just because they can, does not mean a PSNT is always the best option for someone over 64. If the client has SSI, joining a pooled trust triggers a penalty of up to 3 years based on the amount contributed to the trust, suspending payment of the client’s SSI check during the penalty period.[7]  A growing number of states are penalizing Medicaid recipients over 64 for joining a pooled trust.[8] Medicaid’s penalty period is unlimited, so once triggered it may continue until funds are exhausted and the client requalifies.

Determining when a client over 64 might still benefit from joining a PSNT is dependent on the benefit programs the client has, where they live, what the client’s needs are, and how much they are receiving from the settlement. Consultation with an elder law or special needs law attorney is strongly recommended to ensure these factors are given appropriate consideration. In general, clients in the following scenarios should consider joining a PSNT:

  • The client has Medicaid (but not SSI) and lives in a state where Medicaid does not penalize seniors for joining a PSNT.
  • The client has SSI (but not Medicaid), has enough funds from the settlement to “wait out” the 3-year penalty period, and wants to continue receiving SSI in the future. If the client lives in a state with no Medicaid penalty, they may wish to do this so they can take advantage of Medicaid’s nursing home benefit later.
  • The client has SSI and Medicaid, has enough funds from the settlement to survive the SSI penalty period, will not become ineligible for Medicaid when they become ineligible for SSI,[9] and lives in a state where there is no Medicaid penalty.
  • The client does not currently have SSI or Medicaid but will in the future. Both Social Security and Medicaid apply “lookback periods.” This means they look at the client’s financial records to determine whether a transfer occurred in the past that would have triggered a penalty. For SSI, the lookback period is 3 years. For Medicaid, the lookback period is 5 years. For example, if the client will not need Medicaid until 6 years from now, they could establish the trust now, and so long as they do not apply for Medicaid for another 5 years, they will not have a transfer penalty when they do.
  1. Spending the funds

Spending the funds on exempt resources is always an option. To clarify, spending means purchasing. It does not mean giving the funds away. We often encounter situations where money is owed to friends and family, or a family member has been taking care of the client for little or no pay, and the client wants to pay that person back when they receive their settlement. While this is completely understandable, there is a risk that doing so will be seen by Medicaid as a gift unless there was a prior written agreement indicating a loan was taking place. Gifts trigger transfer penalties as discussed above.

This option is dependent on the amount of funds the client is receiving and what they will need shortly after receiving their settlement funds. It is not unusual for a client to receive, for example, $100,000, but they need to purchase an accessible van, a new wheelchair, and need to make modifications to their home. In that case, it does not make sense to create a trust when the funds will be spent immediately. Timing is important: funds received by the client must be spent by the end of the month received.

  1. ABLE Account

If the client had a disability prior to turning age 26 (even if the disability was not diagnosed until after age 26), and the net amount they will receive is small, they might consider an ABLE account. ABLE accounts are tax-advantaged accounts which, like an SNT, are not a countable resource by any of the means-tested benefit programs. The SSA does not impose a transfer penalty for creating ABLE accounts after age 64.[10] Whether any of the Medicaid programs impose a penalty for someone over 64 is less clear. ABLE accounts, due to being relatively new and largely underutilized (particularly by people well over the age of 26 who may have trouble proving their disability onset date), have only recently been addressed by the various benefit programs. Litigation and further regulation may change this in the future.

The funds in an ABLE account can be used on any “qualified disability expense,” which is broadly defined to include almost anything the client needs. Unfortunately, only $15,000 can be contributed to an ABLE account per year, so larger settlements will not be able to take advantage of this option; however, ABLE accounts can be funded by SNTs, and because ABLE funds can be spent on a broader range of items (such as food and shelter expenses, even if the client has SSI), ABLE accounts and SNTs can be used in tandem. For example, if a client with SSI needs to pay his or her rent, the trust cannot make the payment without triggering a penalty. But the trust can disburse funds to an ABLE account, and the client can make the payment from the ABLE account to the landlord without penalty.

  1. Program for All-Inclusive Care for the Elderly (PACE)

PACE is a program operated by states to provide care for people over 55 who qualify for nursing home care but can receive care in the community with appropriate supports.[11] Florida’s PACE programs are overseen by the Department of Elder Affairs.[12] The program provides care covered by Medicaid and Medicare. If the client has Medicaid, care is provided at no cost. If the client has Medicare but not Medicaid, the client pays a monthly premium for the long-term care services received. If the client is not eligible for Medicaid, private pay options are available through the organizations that administer PACE. The benefits of PACE are that care is provided in the community (allowing the client to remain home), care is coordinated by one provider, and the cost is less than a traditional nursing home. This may be a viable alternative for a client who will lose Medicaid due to a transfer penalty.


As you can see, planning for an older client is fraught with issues as some of the options available to younger clients are not available to them. Not only is this unfortunate, it will only get worse as more state Medicaid programs impose transfer penalties for joining a pooled trust, one of the only options allowing a client to keep benefits like SSI and Medicaid after their settlement. The best thing you can do for your client is consult with experts who can assess the situation and present options to help your client make the most of their recovery.


[1] https://www.census.gov/content/dam/Census/library/visualizations/2019/demo/p60-268/figure5.pdf

[2] https://www.medicaid.gov/medicaid/eligibility/medicaid-enrollees/index.html

[3] https://www.ssa.gov/policy/docs/statcomps/ssi_asr/ (Click “Download all tables,” See Table 3).

[4] https://www.ssa.gov/oact/cola/SSI.html

[5] Being 65 and over does not automatically qualify someone for a special needs trust, but all that is required is meeting the SSA’s definition of disabled, even if a formal determination has not been made. If the client had SSI before they turned 65, then they likely qualify because the SSA would have had to determine the person was disabled at that time.

[6] 42 USC 1396p(d)(4)(a)-(c).

[7] POMS SI 01150.110.D.2

[8] Per a CMS memo issued in 2008, States “are not in compliance with [the Social Security Act]” if they “[allow] individuals age 65 or older to establish pooled trusts without applying the transfer of assets provisions.” This issue remains in flux as litigation is resolved state by state. At the time of writing, only 17 states do not impose a transfer penalty for funding an SNT: AL, AK, CA, DC, DE, FL, IA, IN, KY, MA, MD, MT, OH, TN, RI, RV, and WI. All other states either penalize outright or penalize partially (for example, New York imposes a penalty for services provided in an institution, but not for community-based care).

[9] Medicaid eligibility can sometimes be maintained without SSI. See https://www.ssa.gov/ssi/spotlights/spot-medicaid.htm.

[10] An ABLE account can become a countable resource if not administered properly or if the balance reaches $100,000, but there is no penalty based on age so long as the individual otherwise qualifies for the account. https://secure.ssa.gov/apps10/poms.nsf/lnx/0501130740

[11] https://www.medicaid.gov/medicaid/ltss/pace/index.html

[12] http://elderaffairs.state.fl.us/doea/pace.php