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

1. 1. Oregon taxes trust income — up to 9.9%.
   Oregon has no sales tax, but it makes up for it with income tax. Trust income above $125,000 is taxed at 9.9% by the state — on top of federal rates that hit 37% at just $15,200 for trusts. Combined, a trust accumulating investment income in Oregon could face a marginal rate above 46%. Trustees should distribute income to the beneficiary when possible to take advantage of lower individual brackets.
2. 2. Oregon has one of the most aggressive Medicaid estate recovery programs in the country — and the rules depend on which type of trust you have.
   (For third-party SNTs) — Under ORS 416.350, Oregon can recover Medicaid costs not just from probate assets but from joint tenancy property, living trusts, life estates, and survivorship interests. In 2022, an Oregon court ruled the state could pull back a home transfer that happened months before death (DHS v. Hobart). Assets in a properly structured irrevocable third-party trust are completely shielded from 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 the Oregon Health Plan 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. If your child’s income is over $2,982/month, they need a separate trust to qualify for Medicaid. (For first-party SNTs)
   Oregon is an income cap state with no medically needy spend-down option (ended in 2003). Go over the limit by $1 and Medicaid says no. A separate trust called an Income Cap Trust (Oregon’s term for a Miller Trust) fixes it, but your attorney needs to know about it upfront. Some families need both an Income Cap Trust and an SNT.
4. 4. Getting SSI in Oregon doesn’t automatically get you Medicaid.
   Unlike about 30 other states, Oregon requires a separate Medicaid application even if your child receives SSI. This catches families off guard. When you establish or fund an SNT, you need to notify both SSA (for SSI) and Oregon DHS (for the Oregon Health Plan) — they’re completely separate systems.
5. 5. First-party trusts require court approval if the beneficiary can’t manage their own affairs. (For first-party SNTs)
   Under ORS 125, if your child lacks the capacity to establish their own trust, you’ll need a court order. This adds $1,500–$3,000+ in legal costs but also provides judicial oversight. The good news: ORS 125.650(5) allows the court to create a trust even without appointing a full conservator.
6. 6. Oregon’s ABLE savings accounts don’t pay Medicaid back at death.
   Oregon is one of roughly 8–10 states that opted out of ABLE Medicaid recovery (SB 1027, 2017). After death, remaining ABLE funds go to the beneficiary’s estate or named beneficiaries — not to Medicaid. Your attorney should be moving money from a first-party SNT into an Oregon ABLE account (up to $20,000/year) to shift assets from payback-exposed to payback-free.
7. 7. 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.
8. 8. 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.
9. 9. Oregon has virtually no waitlist for developmental disability services.
   Thanks to the Staley v. Kitzhaber settlement in 2000, Oregon eliminated its I/DD services waitlist — an extraordinary achievement. Nationally, over 700,000 people are waiting. Oregon reports zero. The state uses a brokerage system with Personal Agents who help families access services. Your SNT complements these services by paying for things waivers don’t cover.
10. 10. Oregon uses both “guardian” and “conservator” — and has a newer alternative.
    In Oregon, a guardian handles personal decisions while a conservator handles financial decisions (ORS 125). Courts can appoint either or both. Since 2022, Oregon also has supported decision-making (HB 2105) — your child keeps all their legal rights while naming supporters to help with decisions. It’s faster, cheaper, and less restrictive than guardianship. Compare your options →
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), Oregon law (Or. Rev. Stat. § 130.710) 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 understanding how aggressive Oregon’s estate recovery is. Oregon goes beyond probate — they can recover from joint tenancy, living trusts, and life estates. The DHS v. Hobart case (2022) showed they’ll even claw back home transfers made months before death. If you’re relying on anything other than a properly structured third-party trust to protect assets, talk to an Oregon elder law attorney now.
2. Leaving money directly to your disabled child. A well-meaning grandparent leaves $50,000 in a will to your child — and it destroys their SSI and Oregon Health Plan coverage. Every dollar meant for your child needs to go through the trust, not to them. In Oregon, with its $1 million estate tax threshold, proper trust funding can also reduce the estate tax bill.
3. Not moving first-party SNT money into an ABLE account. Oregon doesn’t require Medicaid payback from ABLE accounts (SB 1027, 2017). Every dollar you move from a first-party SNT to an ABLE account (up to $20,000/year) shifts from payback-exposed to payback-free. You also get a $180–$190 refundable Oregon tax credit. If your attorney isn’t doing this, ask why.
4. Assuming SSI automatically means Medicaid in Oregon. Oregon is an SSI criteria state — not a 1634 state. You must file a separate application with Oregon DHS for the Oregon Health Plan. Families who don’t know this can go months without Medicaid coverage after SSI approval.
5. Drafting the trust without accounting for Oregon’s lack of a decanting statute. Unlike states like Florida, Oregon has no law that lets you simply pour assets from one trust into another with better terms. If your trust needs changes later, you’ll likely need court approval. Get the trust drafted right the first time by someone who knows Oregon law.
6. Not getting on the Children’s Extraordinary Needs waiver early enough. Oregon has virtually no I/DD waitlist for adults (thanks to the Staley settlement), but children’s programs are a different story — the Children’s Extraordinary Needs Waiver had 1,400+ children waiting as of mid-2024. Apply early, even if you don’t need services yet.
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 Oregon special needs law. Find Oregon attorneys →

Oregon ABLE Highlight: No Medicaid Payback

Oregon eliminated Medicaid recovery from ABLE accounts in 2017 (SB 1027). At death, remaining funds go to your family — not to the state. This makes ABLE accounts in Oregon even more valuable than in most states. If your child has a first-party SNT, moving money into ABLE is one of the smartest planning moves available.

Beyond the Trust: Other Oregon Planning Steps

Guardianship & Conservatorship: When your child turns 18, you may need legal authority to help with decisions. Oregon uses both terms — guardian (personal) and conservator (financial) under ORS 125. Since 2022, supported decision-making (HB 2105) offers a less restrictive alternative that preserves all rights. Compare your options →
Disability Services: Oregon’s brokerage system provides case management and self-directed services for adults with I/DD — with virtually no waitlist. Contact ODDS at 503-507-2083 to get connected. Learn about waivers →