Montana Special Needs Trust Rules

Why Trusts Matter for SSI Recipients

The SSI resource limit is $2,000. For a young adult who needs to preserve SSI eligibility — and in Montana, the automatic Medicaid enrollment that comes with it — accumulating assets beyond that threshold triggers benefit termination.

A properly drafted Special Needs Trust (SNT) holds assets for the benefit of the individual with a disability without counting against the $2,000 limit. The trust can pay for supplemental needs that SSI and Medicaid don't cover: personal care beyond what Medicaid funds, recreation, transportation, technology, education, travel, home modifications, and quality-of-life expenses.

The key restriction: the trust cannot pay for food or shelter directly. Distributions for housing or food count as "in-kind support and maintenance" (ISM) under SSI rules, which reduces the monthly SSI benefit by up to the Presumed Maximum Value (PMV) — approximately $351 per month in 2026. The trust can make these payments, but the family needs to understand the SSI math before authorizing them.

First-Party vs. Third-Party Trusts

First-party (self-settled) trusts are funded with the beneficiary's own assets — an inheritance received directly, a personal injury settlement, or accumulated savings. Under 42 U.S.C. § 1396p(d)(4)(A), a first-party SNT must be:

• Established by the beneficiary, a parent, grandparent, legal guardian, or a court
• For the sole benefit of an individual with a disability under age 65
• Subject to a Medicaid payback provision — upon the beneficiary's death, the state of Montana can recover Medicaid costs paid during the beneficiary's lifetime from the remaining trust assets

The Medicaid payback is the significant downside of first-party trusts. Everything left in the trust at death is subject to state recovery before any remaining assets pass to family members.

Third-party trusts are funded entirely with other people's money — parents' savings, grandparents' gifts, life insurance proceeds, or family inheritance. Because the assets were never the beneficiary's, there is no Medicaid payback requirement. The remaining trust assets pass to successor beneficiaries named in the trust document.

For most Montana families planning the age-18 transition, a third-party SNT is the preferred vehicle. Parents fund it during their lifetimes or through estate planning (typically a life insurance policy naming the trust as beneficiary), and the assets remain permanently shielded from both SSI resource counting and Medicaid estate recovery.

Montana Families Trust (Pooled Trust)

For families who can't afford the $3,000-$5,000 attorney fees to establish a standalone SNT, the Montana Families Trust offers a pooled alternative. Administered by RDI Financial Wellness (Rural Dynamics Inc.), the pooled trust operates under 42 U.S.C. § 1396p(d)(4)(C).

How it works: the individual's funds are deposited into a master trust and managed in a pooled investment account, but each beneficiary has a separate sub-account tracked individually. The trust handles all investment management, tax reporting, and compliance with SSI/Medicaid rules.

Costs:

• Enrollment fee: $350
• Annual management fees: apply (contact RDI for current rates)
• Minimum initial deposit: none beyond the enrollment fee

The pooled trust accepts both first-party and third-party funds. For first-party sub-accounts, the Medicaid payback provision applies. For third-party sub-accounts, remaining funds pass to named beneficiaries.

The practical advantage for Montana families: the pooled trust provides professional management without the upfront cost of a custom-drafted trust. For families with modest assets — a small inheritance, accumulated savings from an ABLE account rollover, or a settlement — the pooled trust is often the right scale.

Montana Medicaid Estate Recovery

Montana has an expanded estate recovery program under MCA 53-6-167 that targets non-probate assets. This means the state's Medicaid recovery claim can reach assets that pass outside of probate — including, in some cases, assets in revocable trusts, joint accounts, and beneficiary designations.

A properly structured irrevocable third-party SNT is designed to be outside the reach of estate recovery because the assets were never the beneficiary's property. But the trust must be drafted correctly — an attorney experienced in Montana special needs law should ensure the trust language satisfies both federal SSI exemption requirements and Montana's specific estate recovery rules.

First-party trusts and first-party pooled trust sub-accounts are explicitly subject to the Medicaid payback, so estate recovery is built into their structure regardless.

When to Use a Trust vs. an ABLE Account

ABLE accounts and Special Needs Trusts serve overlapping but different purposes:

For most Montana families at the age-18 transition, the practical approach is:

1. Open an ABLE account immediately ($25 minimum, instant asset protection up to $100,000)
2. Establish a third-party SNT when family assets justify it — typically when parents are doing estate planning and want to ensure inheritance doesn't disqualify the young adult from benefits
3. Use the Montana Families pooled trust for first-party funds that exceed ABLE capacity (inheritances above $100,000, settlements)

Finding a Montana Special Needs Planning Attorney

Montana has a limited number of attorneys specializing in special needs trusts. The two most established practices are:

• Montana Elder Law, Inc. — offices in Billings, Missoula, and Flathead Valley, specializing in special needs trusts, guardianship, and estate planning
• Pickel Law PC — Certified Elder Law Attorney (CELA) with Special Needs Alliance membership, licensed in Montana and New Mexico

Attorney fees for a standalone third-party SNT in Montana typically run $3,000-$5,000. Some attorneys offer flat-fee packages that include the trust, a pour-over will, and a letter of intent.

The Montana SSI at 18 & Adult Disability Benefits Guide includes a comparison worksheet for ABLE accounts, standalone trusts, and the Montana Families pooled trust, with specific guidance on how each interacts with SSI resource limits, Medicaid estate recovery, and the 0208 Comprehensive Waiver.

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