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

1. 1. Indiana is an income-cap state — some families need two trusts, not one. (For first-party SNTs)
   Indiana Medicaid has a hard income cutoff for home-and-community-based services ($2,901/month in 2025). Go over by $1 and you’re ineligible. A separate trust called a Miller Trust (or Qualified Income Trust) fixes that — it channels excess income into a trust each month. But a Miller Trust only handles income. An SNT protects assets. Some Indiana families need both. Your attorney needs to understand the difference and coordinate them.
2. 2. Indiana gives you a tax credit for ABLE contributions.
   Starting in 2024, Indiana taxpayers get a 20% tax credit (up to $500/year) on contributions to an INvestABLE account. That’s real money back on your state taxes. You can contribute up to $19,000/year, and the funds grow tax-free. Most states offer a deduction at best — Indiana’s credit is more valuable dollar-for-dollar.
3. 3. Indiana’s disability waivers are at capacity — get on the waitlist now.
   Both the Family Supports Waiver and the Community Integration and Habilitation Waiver hit maximum capacity at the end of 2025. No new slots are expected until at least July 2026. The waitlist is date-of-application — every month you delay is a month longer you wait. Apply through the BDS Gateway as soon as your child’s disability is diagnosed, even if you don’t need services yet.
4. 4. The trust can pay for groceries without reducing your child’s SSI.
   This changed in September 2024. Before that, buying food with trust money counted as “in-kind support” and cut the SSI check. Not anymore. Many Indiana trustees are still operating under the old rules and unnecessarily restricting food purchases. If your trustee won’t buy groceries, show them the updated SSA guidance.
5. 5. The trust paying for housing DOES still reduce SSI.
   Rent, mortgage, utilities — if the trust pays those, the SSI check goes down by up to about $351/month. That’s the tradeoff, and it’s worth understanding before your trustee starts writing checks. Indiana does not provide a state SSI supplement, so the federal benefit ($994/month in 2026) is all your family member receives.
6. 6. Existing trusts can be converted to special needs trusts under Indiana law.
   If a grandparent left money in a regular trust and your child needs benefits, a trustee can restructure it. Indiana’s trust decanting law (IC § 30-4-10-43, enacted 2022) allows a trustee with discretionary authority to move assets from a standard trust into a special needs trust — preserving government benefit eligibility. This can often be done without going to court.
7. 7. First-party trusts require Medicaid payback — ABLE accounts no longer do.
   If the trust was funded with your child’s own money (from a settlement, inheritance, or work), Indiana Medicaid gets reimbursed from whatever is left when your child dies. Families are often shocked by the amount. As of 2026, ABLE accounts have eliminated the Medicaid payback requirement nationwide. Your attorney should be moving money into INvestABLE (up to $19,000/year) to reduce the payback bill.
8. 8. Indiana courts must consider supported decision-making before appointing a guardian.
   Since 2019, Indiana law (IC § 29-3-14) requires courts to explore less restrictive alternatives — including supported decision-making agreements — before granting guardianship. SDM lets your child keep their legal rights while getting help with decisions from trusted supporters. It’s faster, cheaper, and less restrictive than guardianship.
9. 9. Indiana Medicaid has capped ABA therapy — your SNT can fill the gap.
   In 2025, Indiana Medicaid capped Applied Behavior Analysis therapy at 30 hours per week with a 36-month lifetime limit. For families whose children need more intensive support, an SNT can fund supplemental therapy sessions, equipment, and services that Medicaid no longer covers. This is one of the most immediate, practical uses of a trust in Indiana right now.
10. 10. Indiana has no estate or inheritance tax.
    When you pass, there’s no state tax on what you leave behind — Indiana eliminated both its estate tax and inheritance tax. That simplifies planning, but you still need proper remainder beneficiary designations in the trust to make sure assets go where you intend. And remember: federal estate tax still applies if your estate exceeds $13.99 million (2025 exemption).
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), Indiana law (Ind. Code § 30-4-5-12) 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.

Indiana Waiver Alert (February 2026)

Both the Family Supports Waiver and Community Integration & Habilitation Waiver are at maximum capacity. No new slots are expected until at least July 2026. If your family member has an intellectual or developmental disability, apply now through the BDS Gateway to get on the date-of-application waitlist. Every month you wait is a month longer on the list.

From my 15+ 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 — and destroys their SSI and Medicaid the moment assets exceed $2,000. Every dollar meant for your child needs to go through the trust, not to them. Don’t forget retirement accounts: IRA and 401(k) beneficiary designations override your will. Name the trust as beneficiary, not the individual.
2. Confusing a Miller Trust with a special needs trust. Indiana is an income-cap state, and many families hear “trust” and think one covers everything. A Miller Trust only manages income to meet Medicaid’s monthly cap. An SNT protects assets. They serve different purposes, and some families need both. Your attorney must coordinate them together.
3. Not applying for Medicaid waivers early enough. The Family Supports Waiver waitlist can stretch years, and both the FSW and CIH waivers hit capacity at the end of 2025. Families put off applying because their child is young or living at home — then face a multi-year gap when supports are urgently needed. Apply the day you get a diagnosis.
4. Using a generic or out-of-state template. Indiana’s FSSA Office of Medicaid Policy and Planning (OMPP) has a specific policy manual (2615.75.15) governing how trusts are evaluated for Medicaid exemption. A trust that doesn’t meet Indiana’s requirements may be counted as a resource — and your family member loses Medicaid. A $200 online template can cost your family thousands in lost benefits.
5. Giving your child a debit card or cash linked to the trust account. The moment your child can swipe that card, the entire trust balance becomes a countable asset. Benefits gone. If a trustee gives cash directly to an SSI beneficiary, SSI is reduced dollar-for-dollar. The trustee must control all distributions and pay vendors directly.
6. 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. Families create the trust, feel a sense of relief, and then never take the next step.
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 Indiana special needs law. Find Indiana attorneys →

Beyond the Trust: Other Indiana Planning Steps

Guardianship: When your child turns 18, you may need legal authority to help with decisions. Indiana uses “guardianship” for both personal and financial matters. Since 2019, courts must consider supported decision-making first — your child keeps their rights while getting help from trusted supporters. Compare your options →
Medicaid Waivers: Indiana’s Family Supports Waiver and CIH Waiver are both at capacity with long waitlists. Apply through the BDS Gateway as early as possible. Learn about waivers →