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

2026 Alert: California reinstated Medi-Cal asset limits on January 1, 2026 for non-MAGI programs (the pathways used by people who are 65+, have a disability, or live in a nursing facility). The limit is $130,000 for one person, plus $65,000 for each additional household member.

The bigger deadline is 2027. Those limits are scheduled to fall to $21,000 for one person and $31,000 for two no sooner than July 1, 2027. If you are planning around the $130,000 figure, you are planning around a number with a short shelf life.

Two things this alert does not mean. It does not apply to MAGI-based Medi-Cal (the pathway most children and working-age adults use), and the Pickle, Disabled Adult Child, and Disabled Widow(er) programs remain exempt from the asset test. It also does not raise SSI’s resource limit, which is still $2,000.

1. 1. SSI’s $2,000 resource limit is the one that usually matters.
   Medi-Cal’s asset limit gets the headlines, but if your loved one receives SSI, the binding constraint is far lower: $2,000 in countable resources for an individual, $3,000 for a couple. That figure has not changed in decades and is not adjusted for inflation. Assets held in a properly structured SNT don’t count toward it, and neither does a CalABLE balance up to $100,000. Read the rest of this page with that number in mind: a person can be well under Medi-Cal’s limit and still lose SSI.
2. 2. Medi-Cal asset limits came back in 2026, and they get much tighter in 2027.
   California eliminated asset testing for non-MAGI Medi-Cal on January 1, 2024. That ended on January 1, 2026, when AB 116 reinstated a limit of $130,000 for one person plus $65,000 for each additional household member (up to 10). Assets inside a properly structured SNT don’t count. Neither do CalABLE accounts.
   Two qualifications matter. First, this applies to non-MAGI programs, not to the MAGI pathway most children and working-age adults use, and the Pickle, Disabled Adult Child, and Disabled Widow(er) programs stay exempt. Second, and more important: under Welfare and Institutions Code §14005.62, the limit is scheduled to drop to $21,000 for one person and $31,000 for two no sooner than July 1, 2027, once DHCS certifies its systems are ready. If you are sheltering assets, plan against $21,000, not $130,000.
3. 3. Higher income doesn’t automatically end Medi-Cal, but “share of cost” is harsher than it sounds.
   If you qualify under an applicable eligibility category and your income exceeds the limit (the Aged & Disabled FPL program sits near $1,800/month for an individual in 2026), you may be able to keep coverage through the Medically Needy program by meeting a monthly share of cost.
   Understand what that means before you rely on it. Share of cost is your countable income minus the maintenance need level, which is roughly $600/month for an individual living alone and has not been raised in decades. Someone with $1,935/month in countable income faces a share of cost around $1,335 every month, and Medi-Cal generally pays nothing that month until it is met. It is a real pathway, but it is not a modest deductible. The upside compared with other states is that California has no Qualified Income Trust (Miller trust) requirement, which does simplify planning.
4. 4. Court approval applies to settlements and judgments, not to every first-party trust.
   This is widely misstated, so be precise about it. Under Probate Code §3604, when a court is disposing of money belonging to a minor or a person with a disability (typically settlement or judgment proceeds), the terms of a special needs trust must be reviewed and approved by the court. Federal law separately allows a capable adult beneficiary to establish their own first-party SNT, and a first-party trust funded another way generally does not require a court petition.
   When §3604 does apply, budget a court petition, a hearing, and 6–12 weeks of waiting, plus roughly $3,000–$10,000 in legal fees beyond drafting. Notice must be given at least 15 days before the hearing under §3604(a)(2), and the Department of Health Care Services must be notified, with further notice at termination under Title 22 CCR 50489.9(d)(2). Notices go to the DHCS Special Needs Trust Unit, MS 4720, P.O. Box 997425, Sacramento, CA 95899-7425, or via DHCS’s online forms. Skipping notification can lead to DHCS asserting a payback claim later. Third-party trusts require neither step.
5. 5. Medi-Cal estate recovery is limited (since 2017), but the rules depend on which type of trust you have.
   (For third-party SNTs): Before 2017, California’s estate recovery program could reach assets in living trusts, joint accounts, everything. SB 833 changed that. Since January 1, 2017, recovery is limited to assets that pass through formal probate. A properly structured third-party SNT is not subject to estate recovery.(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 Medi-Cal for benefits paid during their lifetime. This isn’t estate recovery. It’s a payback clause built into the trust itself. Whatever remains after Medi-Cal is repaid goes to the family. This is the tradeoff for protecting benefits during your family member’s life.
6. 6. CalABLE is strongly protected from Medi-Cal recovery, but not absolutely.
   Under SB 218, a California resident’s CalABLE account is not subject to recovery by Medi-Cal, and in most situations funds remaining at death pass to the people you name rather than to the state. That is a genuine and valuable advantage over a first-party SNT.
   The limit worth knowing: funds that leave the account and land in the beneficiary’s probate estate can still be reached by estate recovery in qualifying circumstances (where the member was 55 or older, received nursing facility or home and community-based services, the estate goes to formal probate, and there is no surviving spouse, child under 21, or disabled child of any age). A Medicaid claim from another state where the beneficiary received benefits may also apply.
   Moving money from a first-party SNT into CalABLE (up to $20,000/year in 2026) is a strong planning technique for shifting assets from payback-exposed to payback-free, and it is worth discussing with your attorney. Treat it as a planning option that depends on the trust terms, the beneficiary’s benefits, contribution limits, and how the estate is arranged, not as an automatic guarantee.
7. 7. Community property rules mean your spouse’s assets matter.
   California is a community property state. Everything you and your spouse earned during your marriage is presumed to be owned 50/50, even if it’s only in one person’s name. When funding a trust, your attorney needs to determine which assets are community property and which are separate. Getting this wrong can invalidate the trust or create Medi-Cal eligibility problems.
8. 8. The Lanterman Act is a legal entitlement, which is not the same as instant service.
   Under the Lanterman Act, California guarantees services for eligible people with developmental disabilities. It is a legal entitlement rather than a budget-capped program, and there is no waiting list for the waiver itself, which genuinely sets California apart from most states. Through 21 Regional Centers, more than 527,000 Californians are projected to receive services in 2026–27.
   Being entitled to a service is not the same as a provider being available to deliver it. Regional Centers document intake and assessment delays, vendor shortages in some regions, and waits for specific services. Expect to advocate. Your SNT supplements what the Regional Center provides: vacations, electronics, private therapy, recreation. Contact your local Regional Center to get started.
9. 9. The trust can pay for groceries without reducing your child’s SSI.
   This changed on September 30, 2024. Before that, buying food with trust money counted as income and reduced the SSI check. It doesn’t anymore. This is a meaningful quality-of-life improvement for families managing trust distributions.
10. 10. California taxes trust earnings on a graduated schedule. The headline 13.3% is not what a family trust pays.
    Interest, dividends, and capital gains retained inside the trust are subject to California income tax on top of federal tax. Trusts use the same graduated brackets as single filers, and 13.3% applies only to income above $1 million (12.3% plus the 1% Behavioral Health Services Tax).
    What that means in practice: a trust with $50,000 of taxable income owes roughly $1,535 in California tax, an effective rate near 3%. Most family-sized trusts ($200K–$500K in assets) generate far less income than that and land in the 1–4% range. The cost is real and worth managing with municipal bonds, strategic distributions, and timing of capital gains, but it should not scare you away from setting up the trust. Actual tax depends on grantor-trust status, distributions to the beneficiary, deductions, and California residency and source rules, so ask your preparer rather than applying a flat rate. (Illustration uses the most recently published California fiduciary schedule; brackets are indexed annually.)
11. 11. The 30-month look-back is being phased in, and it only touches nursing facility care.
    California suspended asset testing on January 1, 2024, and reinstated it on January 1, 2026. The transfer look-back came back with it, but not all at once.
    Per DHCS guidance, transfers made January 2024 through December 2025 are never reviewed. Starting July 1, 2026, only months after January 1, 2026 are reviewed, and the review window grows by one month each month until it reaches the full 30 months for applications on or after July 1, 2028. So the window today is a few months deep, not thirty.
    The other half matters more for most readers: this applies only to nursing facility level-of-care Medi-Cal. DHCS is explicit that the resulting period of ineligibility does not apply to people enrolled in community-based Medi-Cal. If your child lives at home or in a group home and receives Medi-Cal through SSI or a waiver, this look-back does not reach them. California’s 30 months also remains shorter than the 60 months used by most other states.
12. 12. The trustee generally has to account for every dollar, with some exceptions worth knowing.
    Under California Probate Code §16062, a trustee must account at least annually to each beneficiary to whom income or principal is required or authorized to be distributed. That is the default, and it is a real protection.
    Probate Code §16064 sets out the exceptions: the trust instrument can waive the account, a beneficiary can waive it in writing (and withdraw that waiver later), and §16069 covers further situations. Importantly, even where an accounting is waived, a court can still compel one on a showing that a material breach of the trust is reasonably likely. If a bank, attorney, or family member is serving as trustee and won’t show you where the money is going, ask whether an accounting was waived, and talk to a lawyer about compelling one.

That number is a lot. Here’s what I want you to know.

Most families pay this once, not every year, and there are real ways to bring the cost down. Keep reading. Below you’ll find:

• Pooled trust programs that cost a fraction of an individual SNT (still an SNT, just cheaper to set up)
• ABLE accounts: free to open, let your child hold savings without losing SSI
• Foundational estate documents (will, power of attorney, healthcare directive) you can handle yourself for under $500

The cost is real, but so are the workarounds. Keep reading. I’ll walk you through them.

From my 18+ years helping families (including my own):

1. Leaving money directly to your disabled child. A well-meaning grandparent leaves $50,000 in a will to your child. Because SSI allows only $2,000 in countable resources, that inheritance can suspend SSI immediately, and losing SSI can cascade into losing the Medi-Cal pathway that comes with it. Other Medi-Cal pathways may still be available, so this is a problem to fix quickly rather than a permanent loss, but it is expensive and stressful to unwind. Every dollar meant for your child should go through the trust, not to them.
2. Ignoring community property when funding the trust. In California, your spouse owns half of everything earned during the marriage. If you try to fund a first-party SNT with community assets without a proper transmutation agreement, you could invalidate the trust or create Medi-Cal eligibility problems. Your attorney must sort out which assets are community and which are separate before anything goes into the trust.
3. Planning around $130,000 when $21,000 is coming. During 2024–2025, California had no Medi-Cal asset test. The $130,000 limit returned in January 2026, and it is scheduled to drop to $21,000 for one person no sooner than July 1, 2027. If you accumulated savings during the no-asset-test window and haven’t sheltered them in an SNT or CalABLE account, the 2027 number is the one to plan against.
4. Giving your child unrestricted access to trust money. If your child can withdraw cash or move trust funds at will, you have handed them control, and that is what creates eligibility problems. Note the distinction: SSA’s own guidance (POMS SI 01120.201) recognizes trustee-owned, trustee-administered restricted prepaid cards, where the trustee owns the account, loads the funds, and can block cash access and merchant categories. Used that way, the card balance is not the beneficiary’s resource. A card linked to the trust is not automatically fatal; unrestricted access is the problem. Ask your trustee which kind you have.
5. Not considering CalABLE alongside a first-party SNT. If the trust was funded with your child’s own money, Medi-Cal gets reimbursed from whatever is left when your child dies. CalABLE accounts are generally protected from Medi-Cal recovery in California (SB 218), so moving up to $20,000/year from the SNT into CalABLE can shift assets from payback-exposed to payback-free. It is not an absolute shield, and the right amount depends on your trust terms and benefits, so plan it with your attorney rather than assuming.
6. Over-estimating (or ignoring) the California tax on trust income. The trust pays California tax on income it retains, but not at the 13.3% headline rate. On $50,000 of taxable trust income the state tax is roughly $1,535, about 3%. The mistake runs both ways: some families panic about a rate they will never pay, and others ignore the tax entirely and skip the planning (municipal bonds, strategic distributions, timing of capital gains) that would actually reduce it.
7. Waiting until after you die to set up the trust. If you’re reading this page, do it now. Not next year. Your estate plan, your will, your life insurance beneficiary designations: all of it needs to point to the trust before something happens to you.

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

Beyond the Trust: Other California Planning Steps

Conservatorship: When your child turns 18, you may need legal authority to help with decisions. California uses “conservatorship” (not guardianship) for adults. A limited conservatorship grants only the specific powers your child needs. Since AB 1663, courts must also consider supported decision-making first. Compare your options →
Regional Centers & Waivers: California’s Lanterman Act makes DD services a legal entitlement with no waiver waitlist, delivered through 21 Regional Centers, though provider availability varies by region. The Self-Determination Program gives families direct budget control. IHSS provides in-home support (family members can be paid providers). Learn about waivers →