Special Needs Trusts in Colorado, Arizona, and California
A special needs trust holds money for a person with a disability while protecting their eligibility for SSI and Medicaid. The same federal rules apply in Colorado, Arizona, and California, but each state runs its own Medicaid program. Attorney Daniel R. Klein helps parents, grandparents, and trustees set up and manage these trusts.
In Colorado
Colorado’s Medicaid program is called Health First Colorado.
In Arizona
Arizona’s Medicaid agency is AHCCCS, and its long-term care program is called ALTCS.
- Reviewed by
- Daniel R. Klein, attorney
- Last reviewed
This page is general information about Colorado, Arizona, and California law as of . It is not legal advice.
Who needs a special needs trust?
- You’re a parent or grandparent of a child or adult with a disability.
- You worry about who will look after your child when you no longer can.
- A loved one who gets benefits is about to receive an inheritance or a legal settlement.
- You’ve been named trustee of a special needs trust and want to get it right.
What is a special needs trust?
A special needs trust holds money for a person with a disability. A trustee, the person who manages the trust, uses it to pay for things that improve their life, while they keep needs-based benefits. Two benefits matter most:
- SSI, or Supplemental Security Income, is a monthly federal payment for people who are disabled or 65 and older, and who have very little income or savings.
- Medicaid is the public program that pays for health care and long-term care.
SSI has a strict limit. For 2026, a person generally can’t have more than $2,000 in countable resources, or $3,000 for a couple (AHCCCS eligibility requirements, February 2026). Leaving money directly to your loved one can push them over that line.
What’s the difference between first-party and third-party trusts?
- Third-party trust. This is funded with someone else’s money, such as a parent’s will or living trust.
- First-party trust. This is funded with the person’s own money, like a settlement or an inheritance paid to them. Federal law requires the person to be under 65 and disabled. The trust must repay the state’s Medicaid program from what’s left at their death (42 U.S.C. 1396p(d)(4)(A)). A pooled trust is another type allowed by federal law (42 U.S.C. 1396p(d)(4)(C)).
An ABLE account is a special savings account for a person with a disability. It can work alongside a trust.
How do we help families plan?
We usually help in one of three situations: planning ahead for a loved one, protecting a windfall, or supporting a trustee.
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Listen first
Daniel R. Klein learns about your loved one, their benefits, and your hopes for their future.
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Choose the right tool
Together you decide on a first-party trust, a third-party trust, an ABLE account, or a mix.
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Draft and sign
Daniel prepares the trust. He explains it, and the trustee’s job, in terms you can understand.
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Connect it to your plan
We update your will, living trust, and beneficiary forms so money flows into the trust, not to your loved one directly.
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Support the trustee
We help trustees understand what they can pay for and what records to keep.
Is a special needs trust different in Arizona or California?
The federal rules are the same. Each state runs its own Medicaid program and its own repayment rules.
In Colorado
Colorado’s Medicaid program is called Health First Colorado. A first-party trust must repay it from what’s left when the beneficiary dies (42 U.S.C. 1396p(d)(4)(A)). Health First Colorado also seeks repayment from the estates of some members who were 55 or older or lived in a nursing facility. This is called estate recovery (Health First Colorado).
In Arizona
Arizona’s Medicaid agency is AHCCCS, and its long-term care program is called ALTCS. A trust funded with the person’s own money must name AHCCCS as a primary beneficiary and limit how money is paid out (A.R.S. 36-2934.01). AHCCCS also seeks repayment from these trusts and from ABLE accounts (AHCCCS).
In California
California’s Medicaid program is called Medi-Cal. The federal rule is the same: a first-party trust must repay the state from what’s left when the beneficiary dies (42 U.S.C. 1396p(d)(4)(A)). Since January 1, 2026, Medi-Cal counts property again for older adults and people with disabilities, with a limit of $130,000 for one person (Cal. Welf. & Inst. Code 14005.62). Ask us how Medi-Cal’s own rules apply to your loved one’s trust.
What should I bring?
- Benefit letters or award notices. We only need to know which benefits your loved one gets.
- Guardianship or conservatorship documents, if there are any.
- Any trust, will, or ABLE account information you already have.
- Names of the people you’d trust to serve as trustee, plus a backup.
- A short note about any expected inheritance or settlement. We’ll talk about the details on the call.
You can also print our what to bring checklist.
Please don’t email private documents, like account statements or medical records. We’ll tell you how to share them safely.
What does it cost?
You’ll get a written quote before any work begins. See how our fees work.
Questions people ask
Will an inheritance affect my disabled child’s benefits?
It can. For 2026, SSI generally allows only $2,000 in countable resources for one person (AHCCCS eligibility requirements, February 2026). So a direct inheritance can stop benefits until the money is spent down. Leaving it to a special needs trust instead may protect eligibility. Many families ask grandparents and other relatives to do the same.
Who should be the trustee?
Someone who is organized, honest, and willing to learn the benefit rules. It’s often a sibling, another relative, or a trusted friend, sometimes with a professional to help. Name a backup, too. We explain what the job involves before anyone says yes.
What is an ABLE account?
It’s a special savings account for a person with a disability. For 2026, the disability must have started before age 46, and up to $20,000 can go in for the year (IRS Rev. Proc. 2025-32). Some families use an ABLE account along with a trust. Colorado has its own ABLE plan.
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