Medicaid & SSI: protecting your benefits

Why this matters

Medicaid, Supplemental Security Income (SSI), SNAP, and most state-level “extra help” programs are means-tested — they have strict asset limits, typically $2,000 for individuals (higher in a few states like New York at $15,750, Illinois at $17,500, or California at $130,000 as of 2026).

A lump-sum life settlement payment received directly into your checking account will, in most states, count as a countable asset starting the day it arrives — and can disqualify you from Medicaid coverage during ongoing treatment. This is the single biggest planning issue for patients receiving settlements.

How to preserve eligibility

The standard solution is to direct settlement proceeds into a special needs trust or pooled trust instead of a personal account. These are recognized exceptions under federal Medicaid rules: assets in a properly structured trust don’t count toward your asset limit.

• Special needs trust: Individually established, typically with help from an elder law attorney. Costs $2,000-$8,000 to set up. Best for larger settlements.
• Pooled trust: Run by a nonprofit. Lower setup cost ($300-$1,500), faster (1-3 weeks). Best for smaller settlements or tighter timelines.

What you absolutely cannot do

You cannot receive the settlement, hold it for a few weeks, then transfer it to a trust to “fix” the asset count. Medicaid has lookback rules; transfers within 5 years are penalized. The trust must exist before proceeds arrive.

States with the tightest asset limits

• Texas, Florida, Pennsylvania, Ohio, most others: $2,000
• New Jersey: $4,000
• Missouri: $5,302
• New York: $15,750
• Illinois: $17,500
• California: $130,000 (2026)

Related

• IRS §101(g) tax treatment
• State-by-state asset limits and rules
• Patient’s guide to life settlements (PDF)