A Comprehensive Legal Summary | Updated June 2026
Introduction and Definition
A Special Needs Trust (SNT) is a trust designed to hold assets for a person with a disability without those assets being counted as available resources for means-tested public benefit programs such as Medicaid and SSI. A properly structured SNT allows a beneficiary to receive supplemental support — personal care attendants, assistive technology, therapy, education, transportation, recreation, home modifications, and other quality-of-life services — without losing access to essential government programs that provide healthcare coverage and basic income.
Michigan SNT law is governed by the Michigan Trust Code, which is codified as part of the Estates and Protected Individuals Code (EPIC), MCL § 700.7101 et seq. Michigan’s trust framework predates widespread adoption of the Uniform Trust Code and reflects the state’s own statutory development, including significant reforms enacted by 2024 PA 1 (the EPIC Omnibus Amendment), effective February 2024. All Michigan SNTs must also comply with federal Medicaid law (42 U.S.C. § 1396p(d)(4)) and SSA policy. A distinctive feature of Michigan SNT law is the active role of the probate court — Michigan courts have supervisory authority over SNTs and can order the inclusion of trust provisions reasonably calculated to protect the disabled beneficiary’s interests.
Types of Special Needs Trusts
Michigan recognizes three primary types of special needs trusts:
First-Party (Self-Settled) Special Needs Trusts
A first-party SNT is funded with assets that already belong to the person with the disability — most commonly the proceeds of a personal injury settlement, inheritance received before an SNT was established, or accumulated savings. Key requirements include:
- The beneficiary must be under age 65 at the time the trust is established and initially funded.
- The trust must be irrevocable.
- The trust must be established by the beneficiary, a parent, grandparent, legal guardian, or a court. The beneficiary cannot serve as their own trustee.
- The trustee must have sole and absolute discretion over all distributions — no ascertainable standard obligating payments may be included, as this renders the trust countable for SSI purposes.
- Distributions must be made directly to providers of goods and services on behalf of the beneficiary, not as cash to the beneficiary, to avoid creating countable income for SSI.
- The trust must include a Medicaid payback provision: upon the beneficiary’s death, the Michigan Department of Health and Human Services (MDHHS) must be reimbursed for Medicaid benefits paid during the beneficiary’s lifetime before any remaining funds pass to other beneficiaries.
Michigan’s probate courts exercise supervisory jurisdiction over first-party SNTs. Individual county probate courts — including Kent County and Grand Traverse County — publish specific procedural checklists for SNT petitions, and the court retains authority to order the inclusion of any trust provision reasonably calculated to be in the best interests of the disabled beneficiary.
Third-Party Special Needs Trusts
A third-party SNT is funded with assets belonging to someone other than the beneficiary — parents, grandparents, other family members, or friends. Because the beneficiary never owned the contributed assets, no Medicaid payback is required. The grantor determines who receives any remaining trust assets at the beneficiary’s death, making third-party SNTs the preferred vehicle for family estate planning, gifts, and life insurance proceeds designated for a loved one with a disability.
The Michigan Trust Code provides strong discretionary and spendthrift trust protections. Creditors of a beneficiary generally cannot compel a trustee to make distributions from a discretionary trust. This statutory protection insulates third-party SNT assets from creditor claims and supports the trust’s ongoing integrity over what may be a decades-long administration.
Pooled Special Needs Trusts
Pooled trusts are administered by nonprofit organizations that maintain separate sub-accounts for individual beneficiaries while pooling funds for investment and management purposes. Pooled trusts offer a cost-effective alternative to standalone SNTs, particularly for beneficiaries with modest asset levels or where no suitable individual trustee is available.
Michigan’s Bridges Eligibility Manual (BEM 401) governs how pooled trust transfers are treated for Medicaid purposes. Transfers to pooled trusts by beneficiaries under age 65 are generally exempt from Medicaid divestment penalties. However, transfers to pooled trusts by individuals age 65 or older may be subject to divestment analysis — meaning the transfer could be treated as a disqualifying transfer for less than fair market value, triggering a Medicaid penalty period. Families considering pooled trust enrollment for beneficiaries who are or may become 65 should consult Michigan elder law counsel before proceeding.
First-party pooled sub-accounts require Medicaid payback at death, though the nonprofit may retain a portion of remaining funds as permitted by federal law. Third-party pooled accounts carry no payback requirement.
Requirements for Legal Compliance
For SNT assets to be excluded from countable resources under Medicaid and SSI rules, the trust must satisfy the following requirements:
- The beneficiary cannot serve as trustee of their own first-party SNT.
- The beneficiary cannot have an unrestricted right to withdraw assets from the trust.
- Distributions may be made only at the trustee’s sole and absolute discretion — no ascertainable standard that obligates payment may be used.
- The trust must supplement — not supplant, replace, or impair — the public benefits to which the disabled person is entitled.
- First-party trusts must be irrevocable, established for a beneficiary under age 65, and must include a valid Medicaid payback provision.
- First-party SNTs are subject to Michigan probate court oversight. Attorneys should consult the procedural requirements of the relevant county probate court when petitioning to establish a first-party SNT.
Michigan is a 1634 state — SSI approval automatically triggers Medicaid enrollment through a data link between SSA and MDHHS. No separate Medicaid application is required once SSI is granted. This automatic enrollment covers standard Medicaid; enrollment in HCBS waiver programs (which fund in-home and community support services) requires a separate application and is subject to available slots.
Michigan is not an income cap state and does not require a Miller Trust (Qualified Income Trust). Medicaid eligibility is determined under Michigan’s own income and asset rules rather than a hard income ceiling. Michigan’s Medicaid asset limit for a single individual was adjusted to $9,950 in 2026 — significantly higher than the $2,000 limit used in many other states in this series. This higher asset limit reflects Michigan’s automatic annual adjustment policy and provides more flexibility for beneficiaries who hold modest savings outside of an SNT.
Michigan’s estate recovery program is administered by MDHHS under MCL § 400.112h. MDHHS seeks repayment of Medicaid benefits from the estates of deceased recipients. A properly drafted irrevocable SNT — which is not part of the beneficiary’s probate estate — provides reliable protection against estate recovery, as SNT assets generally do not pass through probate upon the beneficiary’s death.
Limitations on Disbursements
An SNT trustee has broad discretion to pay for items and services that supplement — rather than replace — what Medicaid and SSI provide. Permissible disbursements typically include supplemental medical care, dental and vision services, assistive and adaptive technology, personal care attendants beyond Medicaid-funded hours, home and vehicle modifications, transportation, education and vocational training, recreation, entertainment, travel, and personal items that enhance quality of life.
Two important rules govern how disbursements affect SSI:
Food: As of September 30, 2024, food is no longer classified as In-Kind Support and Maintenance (ISM) by SSA. A trustee can now pay for groceries, restaurant meals, food delivery, and dietary supplements without reducing the beneficiary’s SSI payment. Payments should go directly to vendors rather than as cash to the beneficiary.
Housing: Payments for shelter-related expenses — rent, mortgage, real estate taxes, utilities, and condo fees — can still reduce SSI by up to the federal ISM cap (approximately $351/month in 2026). Trustees should consult with Michigan SNT counsel before making shelter-related disbursements and should consider ownership structures that may reduce ISM exposure.
Michigan’s network of Community Mental Health Services Programs (CMHSPs) — 46 regional agencies across the state — provides Medicaid-funded behavioral health, developmental disability, and mental health services. When a beneficiary receives CMHSP services, the SNT should supplement what the CMHSP provides, not duplicate it. Trustees should coordinate closely with the beneficiary’s CMHSP service plan to ensure distributions are truly supplemental and do not result in the beneficiary paying for services already funded by Medicaid.
Ancillary Issues
Probate Court Oversight of First-Party SNTs
Michigan’s probate courts play an active supervisory role in first-party SNT administration that is more pronounced than in most other states in this series. Under the Michigan Trust Code (MCL § 700.7101 et seq.), the probate court has authority to order the inclusion of any trust provision reasonably calculated to be in the best interests of the disabled beneficiary and to protect the beneficiary’s assets. This court oversight provides an important safeguard for vulnerable beneficiaries — ensuring that trust terms and trustee conduct remain subject to judicial review.
County probate courts in Michigan have developed their own procedural requirements for SNT petitions. Kent County Probate Court and Grand Traverse County Probate Court, among others, publish specific checklists of required trust provisions and petition documents. Counsel establishing a first-party SNT in Michigan should consult the relevant county’s procedures before filing, as requirements vary by jurisdiction.
2024 PA 1 — EPIC Omnibus Amendment
Michigan enacted sweeping changes to the Estates and Protected Individuals Code through 2024 PA 1, effective February 2024. Key changes relevant to SNT planning include:
- The small estate threshold was nearly doubled to $50,000, simplifying estate administration for modest estates that may involve a deceased SNT beneficiary.
- The guardian asset limit was raised from $5,000 to $50,000, expanding the range of assets a guardian can manage on behalf of a ward without court approval.
- New trust nondisclosure provisions were added, providing trustees with additional tools to manage confidentiality of trust information in appropriate circumstances.
These changes reflect Michigan’s ongoing modernization of its estates and trusts framework and may affect how first-party SNTs interact with guardianship proceedings, small estate transfers, and trust administration procedures. SNT practitioners should ensure trust documents are reviewed in light of the 2024 PA 1 changes.
Michigan Medicaid Pooled Trust Divestment Rule (Age 65+)
Michigan’s Bridges Eligibility Manual (BEM 401) applies divestment analysis to pooled trust transfers by individuals age 65 or older. Unlike Massachusetts — which reversed a similar rule through H.5033 in December 2024 — Michigan has not enacted legislation eliminating this age-65 penalty for pooled trust contributions. Families considering pooled trust enrollment for a beneficiary who is 65 or older, or who may reach 65 while on Medicaid, should consult Michigan elder law counsel to evaluate whether a first-party standalone SNT (which does not carry a comparable age-based penalty) may be a better planning vehicle.
Michigan ABLE Savings — MiABLE
Michigan’s ABLE program is called MiABLE, administered by the Michigan Department of Treasury. Key 2026 features include:
- Annual contributions from all sources are capped at $20,000. Employed beneficiaries may contribute an additional amount up to $15,560 above the standard cap under the ABLE to Work provision.
- MiABLE accounts are exempt from SSI resource counting up to $100,000, and do not affect Medicaid eligibility up to the $500,000 lifetime account cap.
- MiABLE offers seven investment portfolio options plus an FDIC-insured checking account — providing investment growth potential unlike ABLE programs in states that offer only checking accounts (such as Maine’s ABLE ME).
- Annual account fees are $56 plus low investment expense ratios of 0.28% to 0.34%.
- Michigan offers a state income tax deduction for MiABLE contributions: up to $5,000 per year for single filers and $10,000 for joint filers. This deduction is available to any contributor, not just the account holder.
- The ABLE Age Adjustment Act, effective January 2026, raises the disability onset age requirement from 26 to 46, substantially expanding eligibility for MiABLE.
- Michigan’s estate recovery rules apply to MiABLE accounts at death — remaining funds may be subject to MDHHS recovery for Medicaid benefits paid after the account was opened.
MiABLE accounts are well-suited for day-to-day supplemental spending and benefit from Michigan’s favorable state income tax deduction. For larger amounts or long-term financial planning, a combination of an SNT (for investment and larger balances) and a MiABLE account (for tax-advantaged supplemental spending) often provides the most comprehensive planning structure. Distributions from an SNT directly into a MiABLE account are permitted under federal law.
Community Mental Health Services Programs (CMHSPs) and Waiver Coordination
Michigan’s 46 Community Mental Health Services Programs serve as the primary gateway to Medicaid waiver services for individuals with intellectual and developmental disabilities, serious mental illness, and co-occurring disorders. CMHSPs provide or arrange an extensive array of services — community living supports, supported employment, behavioral health treatment, crisis services, and more — funded through Medicaid.
For SNT administration purposes, understanding the beneficiary’s CMHSP service plan is essential. The SNT should pay only for services and goods not already funded by MDHHS through the CMHSP. Duplicate payments — where the trust pays for a service the CMHSP already covers — represent a waste of trust assets and potentially a breach of fiduciary duty. Medical Fund Advisors’ administration team coordinates with the beneficiary’s CMHSP plan to ensure that SNT distributions are always supplemental.
Michigan also operates the MI Choice Medicaid Waiver, which provides HCBS services for elderly individuals and adults with physical disabilities. MI Choice slots are limited and waitlists exist. Enrollment requires a separate application to MDHHS. SNT assets are excluded from the waiver financial eligibility calculation, helping beneficiaries with existing trust assets qualify for MI Choice without spending down those assets.
Administration and Oversight
The choice of trustee and administrator is among the most consequential decisions in SNT planning. Michigan’s distinctive probate court oversight of first-party SNTs adds an institutional layer of accountability, but it does not replace the need for experienced professional administration. The court supervises trust structure and can intervene when trust terms are deficient — but day-to-day trust management, distribution decisions, and compliance with Medicaid and SSI rules remain the trustee’s and administrator’s responsibility.
The Complexity of the Role Demands Expertise
A Michigan SNT trustee must navigate federal SSI rules, MDHHS Medicaid policy (including the BEM 401 divestment rules), Michigan probate court procedural requirements, CMH/CMHSP coordination, waiver financial eligibility, and the Michigan Trust Code — all while making individualized distribution decisions. A misstep in any of these areas can reduce SSI benefits, trigger a Medicaid divestment penalty, jeopardize waiver eligibility, or expose the trustee to liability. The complexity is not diminished by Michigan’s more generous $9,950 asset limit — the rules governing trust compliance, distribution discretion, and benefit coordination remain demanding.
Trustees owe a fiduciary duty to act at all times in the best interests of the beneficiary. Decisions that are inconsistent with that duty expose the trustee to personal liability. A professional trustee with SNT experience is trained to recognize and manage these risks. A family member stepping into the role without specialized knowledge carries the same legal obligations without the same training or institutional support.
Professionals Bring Specialized Knowledge That Protects Benefits
With Medical Fund Advisors serving as professional administrator, legal counsel and families gain a partner experienced in public benefits programs, Michigan MDHHS policy, CMHSP coordination, and medical claims management. Michigan’s BEM 401 divestment rules, the 2024 PA 1 EPIC Omnibus changes, and the ongoing evolution of MI Choice and CMHSP policy all require current, state-specific knowledge to apply correctly. Professional administration ensures trust operations remain compliant as the regulatory landscape evolves over what may be a decades-long administration.
Separating Trustee and Administrative Roles Adds Oversight
A professional trustee handles fiduciary decision-making: investment of trust assets, authorization of distributions, and legal compliance. Medical Fund Advisors handles the day-to-day administrative functions: recordkeeping, bill payment, claims processing, vendor negotiation, and MDHHS coordination. Separating these roles creates a system of checks and balances. Neither party operates without the oversight of the other — reducing the risk of error, self-dealing, or administrative neglect. Michigan’s active probate court oversight of first-party SNTs adds yet another layer of accountability, but it supplements rather than substitutes for professional day-to-day administration.
Institutional Continuity Protects the Beneficiary Over a Lifetime
A beneficiary with a disability may depend on their SNT for decades. Individual trustees age, become ill, relocate, or predecease the beneficiary. A professional institution provides the continuity that no individual can guarantee. Michigan’s CMHSP system, waiver programs, and Medicaid policy also evolve over time — meaning the administration team must remain current across multiple state systems simultaneously. Medical Fund Advisors provides the institutional knowledge and continuity that a single individual trustee cannot replicate.
The Recommended Structure
Best practice for Michigan SNTs is a layered structure: a professional trustee makes fiduciary decisions; Medical Fund Advisors serves as separate professional administrator for day-to-day operations, MDHHS coordination, and CMHSP service plan alignment; and a trusted family member serves as trust protector — authorized to review accounts and remove or replace the professional trustee if warranted. The SNT beneficiary should not hold trust protector removal power. This structure keeps families meaningfully engaged while placing legal and administrative burdens with the parties trained to carry them, and is fully compatible with Michigan’s probate court supervisory framework.
Michigan Idiosyncrasies
Michigan Trust Code (EPIC, MCL § 700.7101 et seq.) — State-Specific Framework: Michigan’s trust law is codified as part of the Estates and Protected Individuals Code (EPIC) rather than the Uniform Trust Code. Michigan’s trust framework reflects decades of state-specific development and was most recently modernized by 2024 PA 1. Counsel should ensure SNT documents are drafted and reviewed under Michigan’s specific code provisions rather than generic UTC language.
Probate Court Supervisory Authority: Michigan probate courts have active supervisory jurisdiction over first-party SNTs. The court can order the inclusion of any trust provision reasonably calculated to protect the disabled beneficiary’s interests. Individual county probate courts — including Kent County and Grand Traverse County — publish procedural checklists for SNT petitions. This court oversight provides institutional protection for beneficiaries but also requires counsel to navigate county-specific procedural requirements.
2024 PA 1 — EPIC Omnibus Amendment: Michigan’s 2024 EPIC Omnibus doubled the small estate threshold to $50,000, raised the guardian asset limit from $5,000 to $50,000, and added new trust nondisclosure provisions — all effective February 2024. These changes affect estate administration involving deceased SNT beneficiaries and the intersection of guardianship and trust administration.
No Miller Trust Required — Not an Income Cap State: Michigan is not an income cap state and does not require a Miller Trust (Qualified Income Trust), regardless of the beneficiary’s income level. This differs from income-cap states like Kansas, Kentucky, Idaho, and Louisiana that require a Miller Trust for beneficiaries whose income exceeds $2,982/month.
Higher Medicaid Asset Limit — $9,950 (2026): Michigan’s Medicaid asset limit of $9,950 for a single individual — auto-adjusted annually — is significantly higher than the $2,000 limit used in many other states in this series. This higher threshold provides greater flexibility for beneficiaries with modest savings outside of an SNT, though it does not diminish the importance of proper SNT planning for larger amounts.
Pooled Trust Divestment Penalty for Age 65+ Not Reformed: Michigan’s BEM 401 subjects pooled trust transfers by individuals 65 or older to divestment analysis, potentially triggering Medicaid penalty periods. Michigan has not followed Massachusetts (which reversed a similar rule through H.5033 in December 2024). Families considering pooled trust enrollment for a beneficiary who is or will be 65 should consult Michigan elder law counsel about whether a first-party standalone SNT is preferable.
CMHSP Gateway to Waiver Services: Michigan’s 46 Community Mental Health Services Programs are the primary gateway to Medicaid waiver services for individuals with intellectual and developmental disabilities, serious mental illness, and related conditions. SNT administration must be carefully coordinated with the beneficiary’s CMHSP service plan — the trust supplements what the CMHSP provides, not replaces it. Duplicate payments from the trust for CMHSP-covered services waste trust assets and may breach fiduciary duty.
MiABLE — State Income Tax Deduction and Investment Options: Michigan offers a state income tax deduction for MiABLE contributions: up to $5,000 (single)/$10,000 (joint) per year, available to any contributor. MiABLE offers seven investment portfolios plus a checking account, annual fees of $56 plus 0.28%–0.34% expense ratios, and a $500,000 lifetime cap. The deduction and investment options make MiABLE one of the more attractive ABLE programs among states in this series.
1634 State — SSI Triggers Automatic Medicaid: Michigan automatically enrolls SSI recipients in standard Medicaid. No separate application is required. MI Choice and other HCBS waiver services require separate enrollment and are subject to available slots and waitlists.
Estate Recovery (MCL § 400.112h): MDHHS pursues recovery from the estates of deceased Medicaid recipients under MCL § 400.112h. A properly drafted irrevocable SNT, which does not pass through probate at the beneficiary’s death, provides the most reliable protection against estate recovery. MiABLE accounts are subject to MDHHS recovery for Medicaid benefits paid after the account was opened.
Disclaimer: This summary is for general informational purposes only and does not constitute legal advice. Michigan’s EPIC, trust code, and Medicaid rules are subject to change, and the application of Michigan special needs trust law to individual circumstances requires analysis by a qualified Michigan attorney experienced in special needs planning and elder law.
Prepared by Medical Fund Advisors | [email protected] | www.trustmfa.com