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

1. 1. Montana is a 1634 state — SSI approval means automatic Medicaid.
   If your child qualifies for SSI, they automatically qualify for Montana Medicaid. No separate application, no additional paperwork, no different eligibility criteria. This is simpler than states where you have to apply to Medicaid separately and potentially meet different income or asset rules.
2. 2. Montana uses expanded Medicaid estate recovery — but the rules depend on which type of trust you have.
   (For third-party SNTs) — Most states only recover Medicaid costs from assets that pass through probate. Montana goes further. Under MCA 53-6-167, the state can recover from any property the Medicaid recipient had an interest in at death — including assets passed through joint tenancy, payable-on-death accounts, and even transfer-on-death deeds. The state has 3 years to file a claim. A properly structured third-party special needs trust is one of the few vehicles that reliably protects assets from this expanded recovery, because the assets were never your family member’s to begin with. No Medicaid payback applies — remaining funds go to whoever you name.
   
   (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 Montana 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.
3. 3. The Montana Supreme Court has confirmed: irrevocable trust assets are protected from Medicaid.
   In Estate of Scheidecker v. DPHHS, the Montana Supreme Court reversed a lower court and held that assets in a properly structured irrevocable trust are not available resources for Medicaid eligibility purposes. This is strong precedent — it means Montana courts have already validated the exact type of planning you’re doing. But the trust must be properly drafted. A flawed document doesn’t get the same protection.
4. 4. Montana’s decanting law lets you convert an existing trust into a special needs trust.
   Montana enacted the Uniform Trust Decanting Act in 2021, and Section 72-39-209 specifically authorizes a “special-needs fiduciary” to move assets from an existing trust into a new trust designed to protect government benefits eligibility. This is a powerful tool. If a grandparent’s old trust wasn’t set up to protect your child’s benefits, it can potentially be fixed without going to court. The trustee must follow the statutory requirements, but this is significantly easier than petitioning a judge.
5. 5. Montana has no state estate tax and no inheritance tax.
   Both were repealed years ago. Only the federal estate tax applies, and the 2026 federal exemption is approximately $15 million per individual. For most Montana families, this means one fewer complication in trust planning. You can focus entirely on Medicaid asset protection without worrying about state-level death taxes eating into what you leave behind. This is a real advantage compared to the 12 states that still levy their own estate tax.
6. 6. Trust earnings are taxed in Montana — but the rates are dropping.
   Montana taxes trust income at 4.7% on the first $21,100 and 5.9% above that (plus federal taxes on top). Starting in 2026, the top rate drops to 5.65% under HB 337, with a further reduction to 5.4% scheduled for 2027. These rates are moderate compared to many states. Your trustee and tax preparer should coordinate distributions to minimize the combined tax burden — income distributed to the beneficiary is generally taxed at the beneficiary’s rate instead.
7. 7. Transfer-on-death deeds exist in Montana — but they won’t protect your home from Medicaid.
   Montana allows TOD deeds (MCA 72-6-415) for real property, which transfer ownership at death without probate. That sounds great — but here’s the catch: because Montana uses expanded estate recovery, a TOD deed does NOT shield property from Medicaid claims. The state can still recover against assets transferred this way. If you’re relying on a TOD deed to protect your home, it’s not enough. You need the property in a trust.
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 counted as “in-kind support and maintenance” and reduced the SSI check. It doesn’t anymore. This is a big deal for day-to-day quality of life. Housing payments (rent, mortgage, utilities) still reduce SSI by up to about $351/month in 2026 — that’s the tradeoff, and it’s worth understanding before your trustee starts writing checks.
9. 9. Montana’s DD waiver waitlist averages 7 years — but there’s a no-waitlist alternative.
   The 0208 Comprehensive Waiver for Montanans with intellectual and developmental disabilities has roughly 2,100 people waiting, with an average wait of about 7 years. That’s brutal. But Montana’s Community First Choice (CFC) program is a state plan entitlement — if you meet Medicaid eligibility, you qualify with no waiting list. CFC covers personal care, homemaker services, and emergency response. Apply through DPHHS even if you don’t think you need services today — the trust can supplement what Medicaid doesn’t cover.
10. 10. Montana has real alternatives to full guardianship — and the law requires courts to consider them.
    When your child turns 18, you may need legal authority to help with decisions. Montana uses “guardian” for personal decisions and “conservator” for financial matters — a court can appoint one or both. But since 2021 (SB 31), Montana law formally recognizes supported decision-making as a less restrictive alternative, and courts must consider it before granting full guardianship. Your child keeps their legal rights while getting help from trusted supporters. An incapacitated person with a guardian is explicitly not presumed incompetent under Montana law.
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), Montana law (Mont. Code Ann. § 72-38-813) 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. 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. Montana’s $2,000 asset limit means even a small direct inheritance can wipe out benefits. Every dollar meant for your child needs to go through the trust, not to them.
2. Relying on a transfer-on-death deed instead of a trust. Montana allows TOD deeds for real estate, and they’re popular because they skip probate. But Montana uses expanded Medicaid estate recovery — the state can reach assets transferred by TOD deed, joint tenancy, and POD accounts. A TOD deed that works perfectly for probate avoidance does nothing to stop a Medicaid claim. Your home needs to be in a trust, not just on a TOD deed.
3. Not understanding that Montana’s expanded estate recovery reaches beyond probate. This is the trap that catches the most Montana families. In states with probate-only recovery, avoiding probate protects assets. In Montana, it doesn’t. Under MCA 53-6-167, Medicaid can recover from essentially any asset your loved one had an interest in — regardless of how it transfers. Only assets in a properly structured trust are reliably protected.
4. 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, real property deeds. This is the most common mistake I see, and in Montana, where expanded estate recovery makes proper planning critical, an unfunded trust is worse than useless — it gives you a false sense of security.
5. Not knowing that an existing trust can be converted to an SNT. Montana’s 2021 Decanting Act (MCA 72-39-209) specifically authorizes trustees to move assets from an existing trust into a special needs trust. If a grandparent set up a trust years ago that doesn’t protect benefits, you don’t necessarily need to start over. Talk to an attorney about decanting — it could save your family thousands.
6. Assuming ABLE accounts are payback-free in Montana. Montana exercises its right to file Medicaid payback claims against ABLE account balances at death. Unlike states that have waived this, Montana will recover Medicaid costs from whatever remains. ABLE is still valuable, but factor payback into your planning. This applies to ABLE accounts only — third-party special needs trusts have no payback requirement.
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. Montana’s strong trust law framework means your attorney has good tools to work with. Use them.

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

Important: Montana exercises its right to file Medicaid payback claims against ABLE account balances at death. If your child received Medicaid after opening their ABLE account, the state can recover the cost of those services from whatever remains in the account. Outstanding qualified disability expenses (including burial costs) get priority over Medicaid claims. This is different from states like Florida and Oregon that have waived ABLE Medicaid payback entirely. Factor this into your planning — ABLE is still valuable in Montana, but it doesn’t offer the same payback-free advantage as in some other states.

Beyond the Trust: Other Montana Planning Steps

Guardianship: When your child turns 18, you may need legal authority to help with decisions. Montana uses “guardian” for personal matters and “conservator” for finances. Since 2021 (SB 31), supported decision-making is formally recognized as a less restrictive alternative — courts must consider it before granting full guardianship. Compare your options →
Disability Services: Montana’s 0208 DD Waiver has a ~7-year waitlist, but Community First Choice (no waitlist) covers personal care services. Apply through DPHHS even if you don’t need services today. Learn about waivers →