Short Answer

In North Carolina, a cash trust payment usually counts as income for needs-based benefits like SSI and Medicaid in the month you receive it and can reduce or suspend those benefits. Money you keep into the next month can count as a resource and affect eligibility. Payments for food or shelter can also reduce SSI, even if the trustee pays a vendor directly. SSDI (Social Security Disability Insurance) is not needs-based, so a trust payment typically does not affect SSDI eligibility.

Understanding the Problem

You live in North Carolina and receive Social Security and Medicaid. You recently received a distribution from a trust and want to know if your benefits are at risk if you accept or keep that payment.

Apply the Law

For needs-based programs, the key questions are what type of benefit you have and how the trust distributes funds. SSI and Medicaid (Aged, Blind, and Disabled categories) count most cash received as income in the month received and as a resource if retained into the next month. By contrast, SSDI is insurance-based and not reduced by financial resources. The County Department of Social Services (DSS) administers Medicaid locally; the Social Security Administration handles SSI and SSDI. You must promptly report changes in income or resources; agencies often require notice within days of the change, and procedures can change.

Key Requirements

• Identify your benefit: SSI and Medicaid are needs-based; SSDI is not. Needs-based benefits react to income received and resources retained.
• Type of trust and distribution: Cash paid to you usually counts as income. A discretionary supplemental needs trust can preserve eligibility when it pays for extras, but payments for food or shelter can still reduce SSI.
• Timing matters: What you receive in a month can affect that month’s benefits; what you still hold on the first of the next month can affect ongoing eligibility.
• Revocable vs. irrevocable: Assets you can reach or control (including in a revocable living trust) are generally treated as available and are subject to estate recovery at death.
• Notice/reporting: Report trust payments and changes in resources to DSS and Social Security promptly to avoid overpayments and penalties.

What the Statutes Say

• North Carolina Gen. Stat. § 108A-70.5 (Medicaid Estate Recovery) – State may recover certain Medicaid costs from the recipient’s estate after death.
• North Carolina Gen. Stat. § 36C-5-505 (Revocable trusts and creditors) – Property in a revocable trust is available to the settlor’s creditors, which informs Medicaid availability and recovery.
• North Carolina Gen. Stat. § 36C-5-504 (Discretionary trusts and creditors) – Creditors generally cannot reach a discretionary trust before distribution; once distributed, funds are exposed.

Analysis

Apply the Rule to the Facts: You received a trust distribution while on Social Security and Medicaid. If your Social Security is SSI, the cash counts as income this month and any amount you still have next month may count as a resource that could reduce or suspend benefits. If your Social Security is SSDI, the payment itself typically does not affect SSDI, but Medicaid may still consider the payment as income/resources for eligibility.

Process & Timing

1. Who files: You (or your representative) report to agencies. Where: Report to your County DSS (Medicaid) and the Social Security Administration. What: Report the trust payment, date, and amount; provide the trust terms if requested. If needed, ask your trustee to coordinate. When: Report promptly; agencies often require notice within 10 days of the change.
2. If the payment risks your eligibility, consider solutions: (a) ask the trustee to pay vendors for goods/services other than food or shelter; (b) if you received funds in your name, consult about a first-party special needs trust or pooled special needs trust with a Medicaid payback provision to shelter assets prospectively.
3. If you plan to place your home in a trust for your children, get advice before transferring: moving a home into a revocable trust generally does not protect it for Medicaid, and transfers for less than fair value can trigger look-back penalties for long-term care Medicaid. Expect to share documents with DSS and adjust your plan accordingly.

Exceptions & Pitfalls

• SSDI v. SSI: SSDI is not reduced by assets; SSI and Medicaid are. Confirm which benefit you receive.
• In-kind support: Payments that cover food or shelter can reduce SSI even if the trustee pays a landlord or utility directly.
• Revocable living trusts: Assets are considered available and subject to Medicaid estate recovery; they are not a Medicaid shield.
• Look-back penalties: Gifts or transfers to children or to certain trusts can trigger a penalty for long-term care Medicaid. Limited exceptions exist but are fact-specific.
• Reporting gaps: Failing to notify DSS or Social Security can cause overpayments and penalties. Keep records of all trust distributions and uses.
• Trustee discretion: A well-drafted supplemental needs trust and careful trustee payments (for extras rather than food/shelter) help preserve benefits.

Talk to a Estate Planning Attorney

If you’re dealing with a trust distribution while on SSI or Medicaid and need to safeguard your benefits, our firm has experienced attorneys who can help you understand your options and timelines. Call us today at 919-341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.