65 and Older

Information for Beneficiaries who are 65 years and Older

For individuals sixty-five years or older who are expecting a settlement or have other funds, and who currently receive or may apply for Medicaid Long-Term Care (LTC) and/or Supplemental Security Income (SSI), the decision of what to do with these funds requires careful consideration.


The following information provides:

  • Description of the Problem
  • SSI Transfer of Assets Penalty
  • Medicaid Long Term Care Transfer of Assets Penalty
  • Pooled Trust Options
  • Summary of Guidance

Description of the Problem


When an individual who is sixty-five years or older receives or expects to apply for SSI or Medicaid LTC receives a settlement or has other funds that may disqualify them, they can either keep the money outright or deposit it in a (d)(4)(C) pooled special needs trust.[1] Each option presents potential risks and complications.


If an individual who is sixty-five years or older keeps their funds outright, the individual will no longer qualify for SSI or Medicaid LTC.[2] Therefore, many are facing a choice between losing their benefits indefinitely until these funds are spent down, or accepting a penalty period to one or both of these benefits.

SSI Transfer of Assets Penalty


SSI is a federal program administered by the Social Security Administration (SSA) that provides monthly cash payments to individuals with limited income and resources who are age sixty-five or older or are blind, or have a qualifying disability. It is designed to meet basic needs for food, clothing, and shelter. Because it is solely a federal program, the rules do not vary state-by-state.[3]


For SSI recipients 65 or older who transfer funds into a pooled special needs trust, the Social Security Administration applies a fair market value analysis to determine if value was received. If the transfer is not approved for fair market value, the period of ineligibility for SSI can be up to three years. The length of time is based on the amount of the non-fair-market-value transfer, divided by the current maximum SSI rate.


The following is a federal Administrative Law Judge’s decision finding that fair market value was received, which illustrates the analysis the Judge used for this determination.


Important Note – SSI does not automatically restart when a period of ineligibility of 12 months or more ends, you must reapply using the same eligibility process again, including providing updated financial information.


If SSI is the only consideration, the CCT First-Party Pooled Special Needs Trust is typically going to be an attractive option even for an individual over the age of 65, except for the smallest transfers where the individual expects to spend down the funds over a short period of time. After the period of ineligibility, the funds in the trust will not disqualify the beneficiary from eligibility. Since the maximum period of ineligibility is 36 months, the maximum loss to the beneficiary is 36 times the monthly SSI rate – in 2026, this works out to $35,784.00. That is a significant loss, but the alternative is losing SSI completely until the settlement is spent down.


As an example, consider a person over the age of sixty-five, receiving SSI, who is anticipating a $500,000.00 settlement or has the same amount in personal funds. If the funds are put into the CCT First-Party Pooled Special Needs Trust, the client will be eligible for SSI again after 36 months, and even if the trust is used dollar-for-dollar to replace the temporarily lost SSI, there will be a large pool of funds remaining after the end of the period of ineligibility. On the other hand, if the money was kept outright, SSI would be lost entirely until the money was spent down.

Medicaid Long Term Care Transfer of Assets Penalty


Medicaid LTC provides for institutional care, nursing homes, and home and community-based services (HCBS) for those meeting specific income and asset limits, and who have a qualifying disability. Medicaid is a joint federal-state program, and each state has different statutes, regulations, and policies that affect eligibility.


When applying for Medicaid LTC,[4] the state reviews the applicant's financial history for the past sixty months (5 years). They check for any transfers of assets for less than fair market value, including gifts. These are called disqualifying transfers, which will result in a penalty – a period of months during which the individual does not qualify for Medicaid LTC. Funds that are spent on valid spend-down items are not disqualifying transfers. The American Council on Aging maintains information on spending down funds on their Medicaid Planning Assistance website.


In 2008, the Centers for Medicaid & Medicare Services clarified that for individuals aged sixty-five or older, transfers into a first-party pooled special needs trust are not statutorily exempt from a transfer of assets penalty. The rule is applied differently depending on the state. Some states do not impose a penalty, others implemented a penalty period based on the value of the transfer and the average cost of care in the state or area, and others analyze each transfer to determine if fair market value was received.


As of the writing of this article, the following states fall into each category:

States with No Penalty

Alabama, Alaska, Arkansas, California, Delaware, Florida, Indiana, Kentucky, Maryland, Massachusetts, Montana, New York, Ohio, Rhode Island, West Virginia, and Wisconsin.


In a no penalty state, the Medicaid calculus is easy – transferring the funds into the CCT First-Party Pooled Special Needs Trust has no penalty, and establishing the trust will protect the client’s benefits.

States that Impose a Penalty

Arizona, Georgia, Hawaii, Idaho, Illinois, Iowa, Louisiana, Maine, Michigan, Nevada, New Hampshire, New Mexico, Nebraska, New Jersey, North Dakota, Missouri, Oregon, Pennsylvania, South Carolina, South Dakota, Texas, Vermont, Virginia, Washington, and Wyoming.


In a penalty state, the decision will have to be made whether a penalty to Medicaid LTC is acceptable to avoid a spend-down, described in detail under Pooled Trust Options immediately below.

States that Apply a Fair Market Value Analysis
(to determine whether to impose a transfer penalty)

Colorado, Connecticut, Kansas, Minnesota, Mississippi, North Carolina, Oklahoma, Tennessee, and Utah.


Fair market value states use the standard 5-year look-back period. “Fair market value” simply means what something would sell for on the open market, and if you give it away or sell it for much less than that amount during the look-back period, Medicaid may calculate a penalty period – a number of months during which you would not receive Medicaid Long-Term Care. However, in these states, Medicaid may take a spending plan or other information into account to confirm that the funds are intended to be used for services for the Beneficiary at market prices during their lifetime.

For example, if a beneficiary with a life expectancy of 20 years transfers $100,000 into a trust, the Beneficiary might document a plan to use about $10,000 per year for their needs – which would deplete the trust for their use prior to death. This gradual, planned approach helps show that the funds are intended to be used for the beneficiary during their lifetime.


Use this Fair Market Value Certification to document the use of trust funds.

Pooled Trust Options


Pooled trusts provide several options that can assist clients facing the Medicaid LTC dilemma. As a non-profit organization, CCT offers pooled trust administration services for individuals with a disability, who have been injured, or are vulnerable for other reasons. Each beneficiary’s funds are accounted for separately and applied for the benefit of that individual beneficiary. The funds are pooled for investment purposes to allow for lower fees and greater opportunity for growth. This structure allows the trustee to use the assets for supplemental needs and quality-of-life expenses not covered by public benefits, without disqualifying the beneficiary from essential programs.

  • First-Party Pooled Special Needs Trust

    A first-party pooled special needs trust, also known as a (d)(4)(C) trust, is an irrevocable trust designed for individuals with disabilities who wish to protect their own assets, such as a personal injury settlement or inheritance, while preserving eligibility for means-tested government benefits like Medicaid and SSI. 


    When funds are deposited into CCT’s First-Party Pooled Special Needs Trust for a person over the age of sixty-five, depending on the state, there may be a period of ineligibility for Medicaid LTC based on the value of the transfer. However, the funds will not be counted as an asset against the individual for benefits eligibility once the period of ineligibility has passed. 


    In a fair market value state, there are additional variables. A payment plan and other documentation demonstrating that the funds are intended to be used for the beneficiary’s benefit during the beneficiary’s actuarially expected lifetime can result in a reduced or completely eliminated penalty period, which would make the First-Party Pooled Special Needs Trust the best option. 


    In a penalty state, the benefits recipient must make a judgment call whether the risk of a penalty period is worth accepting for the potential benefit of having funds left in the trust after the penalty period or look back period is over. This will depend on the size of the settlement, the health and life expectancy of the individual, the average cost of nursing home care in the individual’s locality, and other factors. 


    For example, a person aged 65, in good health, who did not expect to require assistance with long-term care for the foreseeable future, might choose to put a settlement or personal funds of any size into a first-party pooled special needs trust, knowing that if he or she needed to apply for Medicaid LTC after the five year lookback period has passed, the transfer will not result in a penalty. Conversely, a person aged 75, whose health has declined and who expects to need to apply for Medicaid LTC in the immediate future, may choose to spend down a $50,000.00 settlement rather than risk a penalty period. And that same person who received a $5 million settlement instead might establish the trust because they will not need Medicaid LTC to fund the long-term care needs. 

  • Settlement Preservation Pooled Trust

    A Settlement Preservation Pooled Trust operates under a health, education, maintenance, and support (HEMS) distribution standard rather than a special needs trust sole discretion standard. A Settlement Preservation Pooled Trust can be an option for individuals in fair market states and / there are adequate funds to meet the individual’s needs, and the individual can benefit from trust administration. 


    If the funds are sufficient to provide for the client’s needs for their lifetime – for example, a client who receives millions of dollars – the client may simply accept that they will no longer be eligible for Medicaid LTC. In a case like that, where the client can benefit from trust administration services, or if required by the court, the Settlement Preservation Pooled Trust can be an attractive option, since the individual will be ineligible for Medicaid LTC regardless of whether the funds are in trust.

Summary of Guidance


These different types of pooled trust are used in different circumstances for individuals aged sixty-five or older who currently receive or may apply for Medicaid LTC or SSI. Many of these individuals will benefit from trust administration services regardless of their eligibility benefits, so a spend-down may not be appropriate.


  • In no-penalty states, the CCT First-Party Pooled Special Needs Trust is the clear choice to protect benefits while providing professional trust administration services.
  • In fair market value states or penalty states, the optimal approach varies by settlement or funding size, the beneficiary’s life expectancy, and care needs. Smaller amounts may be spent down, while for large amounts of money the Settlement Preservation Pooled Trust is appropriate when the client would benefit from professional trust services.

Contact CCT to discuss individual circumstances with our experienced New Clients staff.

[1] After age sixty-five, standalone first-party special needs trusts, also called (d)(4)(A) or self-settled trusts, cannot be established.

[2] If those assets cause them to exceed the applicable asset limit, which for Medicaid LTC can vary from state to state. SSI and most states have an asset limit of $2,000.00 but some states, including California, New York, and Maine, have higher asset limits.

[3] See POMS SI 01150.001.

[4] Regular Medicaid for the Aged, Blind, and Disabled of any age does not have this penalty and look-back requirement.

THIS INFORMATION IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.


SSI and Medicaid LTC rules and how individual states apply them can change over time. CCT strives to keep our information up to date as possible; however, state-specific policies and interpretations may evolve. CCT recommends confirming current rules with a qualified professional.


This document was compiled in May 2026.