Arkansas Special Needs Trust Rules (2026) | Complete State Guide

1. 1. Arkansas is a 1634 state — SSI approval means automatic Medicaid.
   If your child qualifies for SSI, they automatically qualify for Arkansas Medicaid. No separate application, no additional paperwork. SSA handles the Medicaid eligibility determination for the state. This is simpler than states where you have to apply to Medicaid separately with different criteria.
2. 2. Arkansas gave third-party trusts explicit statutory protection in 2023.
   Act 293 added special needs trust definitions directly to the Arkansas Trust Code (ACA § 28-73-818). Third-party trusts are now explicitly exempt from all Arkansas laws and regulations regarding trust treatment for Medicaid eligibility. That’s not just case law or policy — it’s written into statute. Most states don’t have this level of clarity.
3. 3. Medicaid estate recovery depends on which type of trust you have — and Arkansas makes the third-party path especially strong.
   (For third-party SNTs) — Arkansas limits Medicaid estate recovery to probate assets only. That’s already favorable. But here’s the real advantage: Arkansas allows beneficiary deeds (transfer-on-death deeds for real estate), and Act 570 of 2021 made them explicitly exempt from Medicaid estate recovery. A properly filed beneficiary deed means your home passes to your child’s trust at death — skipping probate and MERP entirely. POD accounts and life insurance do the same for financial assets.
   
   (For first-party SNTs) — Different rule. Because this trust was funded with your family member’s own money, federal law (42 USC §1396p) requires that any funds left in the trust when they pass away must first reimburse Arkansas Medicaid for benefits paid during their lifetime. This isn’t estate recovery — it’s a payback clause built into the trust itself. Whatever remains after Medicaid is repaid goes to the family. This is the tradeoff for protecting benefits during your family member’s life.
4. 4. No state estate tax, no inheritance tax, no gift tax.
   Arkansas has none of these. Only federal estate tax applies (with a $15 million per person exemption in 2026). That’s one major concern you can cross off your planning list. Many families in states like Massachusetts or Connecticut face state estate taxes kicking in at $1–2 million — Arkansas families don’t.
5. 5. Trust income is taxed at just 3.9% — one of the lowest rates in the country.
   Arkansas taxes trust income at the same rates as individuals, topping out at 3.9% on income over about $25,700. Compare that to California (14.4%), New York (10.9%), or even the federal trust rate that hits 37% at just $15,200. If you’re choosing where to establish a trust, Arkansas’s rate is a genuine advantage.
6. 6. Both spouses must sign when transferring real estate to a trust.
   Arkansas is one of only three states (along with Ohio and Kentucky) that still recognizes dower and curtesy — old property rights that give a surviving spouse automatic claims to real estate. The practical impact: if you’re transferring your home into a trust, both spouses must sign the deed. Skip this step and the transfer may be challenged. Your attorney should know this, but it trips up out-of-state firms.
7. 7. Existing trusts can be restructured without going to court.
   Arkansas’s decanting law (Act 293, 2023) lets a trustee move assets from one irrevocable trust to a new one with better terms — including converting a regular trust into a special needs trust. The Uniform Decanting Act (Act 680) took effect January 1, 2026, adding even more flexibility. If circumstances change, the trust can adapt.
8. 8. The trust can pay for groceries without reducing your child’s SSI.
   This changed in October 2024. Before that, buying food with trust money cut the SSI check. It doesn’t anymore. This is a big deal for day-to-day quality of life.
9. 9. The trust paying for housing DOES still reduce SSI.
   Rent, mortgage, utilities — if the trust pays those, the SSI check goes down (up to about $351/month in 2026). That’s the tradeoff, and it’s worth understanding before your trustee starts writing checks.
10. 10. Arkansas has no comprehensive alternatives to guardianship — plan accordingly.
    When your child turns 18, you lose all legal authority to help with decisions. Arkansas uses “guardian” (for incapacitated persons) and “conservator” (for competent persons who need help managing affairs) — courts can appoint one or both. A supported decision-making bill was introduced in 2021 (HB 1005) but failed. Right now, guardianship is the primary path, though the court must consider less restrictive alternatives and your child retains all rights not specifically limited by the order.
11. 11. The person managing the trust (the “trustee”) has to account for every dollar — no matter what type of trust you set up.
    Whether you created a third-party trust (funded with your money) or your child has a first-party trust (funded with theirs), Arkansas law (Ark. Code Ann. § 28-73-813) gives your family the right to request a full accounting of how trust money is being spent. This isn’t optional — it’s the law. If a bank, attorney, or family member is serving as trustee and won’t show you where the money is going, that’s a red flag.

From my 15+ years helping families (including my own):

1. Not using a beneficiary deed for your home. Arkansas allows transfer-on-death deeds for real estate, and since 2021, they’re explicitly exempt from Medicaid estate recovery. That means your home can pass directly to your child’s trust without going through probate — and Medicaid can’t touch it. A beneficiary deed costs almost nothing to file, but families who don’t know about it leave their biggest asset exposed.
2. Only one spouse signing when transferring property to the trust. Arkansas is one of three states that still has dower and curtesy rights. Both spouses must sign any deed transferring real estate to a trust. If only one signs, the surviving spouse can challenge the transfer later — potentially unraveling your entire plan.
3. Leaving money directly to your disabled child. A well-meaning grandparent leaves $50,000 in a will to your child — and destroys their SSI and Medicaid. Every dollar meant for your child needs to go through the trust, not to them.
4. Hiring a general estate planner instead of a special needs attorney. Arkansas has only one member of the Special Needs Alliance in the entire state. That doesn’t mean there aren’t qualified attorneys — but it does mean you need to look carefully. An attorney who mostly does wills and basic trusts may not know the Medicaid rules, the PASSE system, or the specifics of Act 293.
5. Waiting too long to get on the CES waiver list. Arkansas’s developmental disabilities waiver (Community and Employment Supports) still has roughly 1,900 people waiting. The wait has been years long. Get your child on the list now, even if you don’t need services today. You can always decline when your number comes up.
6. Ignoring the ABLE account tax deduction. Arkansas offers a state income tax deduction of up to $5,000 ($10,000 for married couples filing jointly) for contributions to the Arkansas ABLE Plan. That’s real money back in your pocket — and the account itself lets your child save up to $100,000 without jeopardizing SSI. If you’re not using ABLE alongside the trust, you’re leaving a benefit on the table.
7. Creating the trust but never funding it. A trust sitting in a drawer with no assets in it protects nothing. The trust only works if you actually move assets into it — bank accounts, life insurance beneficiary designations, your will, beneficiary deeds on real estate. Do it now, not someday.

The best way to avoid these mistakes? Work with an attorney who knows Arkansas special needs law. Find Arkansas attorneys →

Important: Medicaid Payback Applies to Arkansas ABLE Accounts

Unlike some states, Arkansas does require Medicaid payback from ABLE account balances after the account owner’s death. After paying any outstanding qualified disability expenses (including funeral costs), remaining funds may be used to reimburse the state for Medicaid services. This is calculated only from amounts paid after the ABLE account was opened. Factor this into your planning.

Beyond the Trust: Other Arkansas Planning Steps

Guardianship: When your child turns 18, you may need legal authority to help with decisions. Arkansas uses “guardian” (for incapacitated persons) and “conservator” (for competent persons needing help managing affairs). No SDM law exists yet. Compare your options →
Medicaid Waivers: Arkansas’s CES waiver has ~1,900 people waiting — and historically the wait has been years. Apply through DDS (501-683-5687) now, even if you don’t need services yet. Learn about waivers →