Parents of children with disabilities often face a complex financial landscape. Planning for their child’s future requires careful consideration, particularly in terms of protecting eligibility for critical government benefits like Supplemental Security Income (SSI) and Medicaid. Two primary tools exist to help families meet these challenges: Special Needs Trusts (SNTs) and ABLE accounts. While both offer valuable support, understanding their differences is essential for making informed choices.

Eligibility

ABLE accounts are available to individuals whose disability onset occurred before age 26. This age restriction expands in 2026 under the ABLE Age Adjustment Act, which will raise the age of onset for eligibility to 46. This change will extend eligibility to individuals whose disabilities began after age 26 but before age 46, significantly expanding access for those who develop disabilities as adults.

Special Needs Trusts (SNTs), however, have more flexible age requirements. First-party SNTs, which are funded with the individual’s own assets, must be established before the individual reaches age 65. However, third-party SNTs, funded by others like parents or grandparents, have no age restrictions. This flexibility makes SNTs a viable option for individuals of any age who may receive financial assistance or an inheritance.

Contribution Limits

ABLE accounts have annual contribution limits that align with the federal gift tax exclusion amount. All contributions, whether from the individual, family, or friends, count toward this limit. Staying within this limit is essential to avoid possible tax consequences. By contrast, SNTs do not have contribution limits, allowing families or beneficiaries to accommodate substantial inheritances or financial gifts without risking eligibility for government benefits.

Asset Limits

States generally cap the total assets in an ABLE account, with limits typically between $300,000 and $500,000. Additionally, if the balance exceeds $100,000, it can affect SSI eligibility, though it will not impact Medicaid. SNTs, on the other hand, have no cap on assets, making them ideal for families who expect to manage larger sums of money. This flexibility is particularly valuable for families managing larger inheritances or planning for lifelong care, as it removes the stress of navigating asset caps.

Control and Management

ABLE accounts give the beneficiary a greater degree of control over their finances. If they are capable, they can manage their account or assign an authorized representative. This setup promotes independence, allowing those with disabilities to make spending decisions on their own terms. In contrast, SNTs are managed by a trustee appointed by the trust’s creator. This oversight is especially beneficial for beneficiaries who need assistance managing finances, ensuring their funds are used appropriately, and protecting them from financial exploitation.

Qualified Expenses

Both ABLE accounts and SNTs offer tax-free benefits when used for qualified expenses, but they differ in terms of what those expenses can cover. ABLE accounts provide more flexibility, allowing funds to go toward a wide range of needs, from housing and transportation to education, personal support services, and general living costs. In contrast, SNT funds are generally directed toward enhancing the beneficiary’s quality of life without replacing government benefits – for example, by covering specialized therapies or recreational activities not typically funded by Medicaid.

Medicaid Payback

Both ABLE accounts and first-party SNTs may be subject to Medicaid payback upon the beneficiary’s death, meaning Medicaid could claim funds remaining in these accounts as reimbursement for benefits it provided. This payback ensures Medicaid can recover costs for services provided, but it’s an important consideration for families planning their loved one’s financial future. Notably, third-party SNTs, funded by someone other than the beneficiary, are not subject to Medicaid payback, allowing families to pass on a legacy to other loved ones without the risk of recoupment.

Complexity and Cost

ABLE accounts are generally more straightforward and less expensive to set up and maintain compared to SNTs. The fees are typically lower, and there are fewer reporting requirements, which makes ABLE accounts a more accessible choice for many families. In contrast, SNTs require legal expertise to establish and manage, which can lead to higher initial and ongoing costs. While SNTs offer unmatched flexibility and protection for larger sums, families should weigh these benefits against the ongoing legal and administrative costs.

Making an Informed Choice

Ultimately, choosing between an ABLE account and a Special Needs Trust depends on the individual’s financial needs and goals. For many families, using both tools can offer the most comprehensive support, combining independence, flexibility, and long-term protection. Consulting with a special needs planning attorney and a financial advisor can help families make well-informed choices that provide their loved ones with security and a high quality of life.

If you have questions about planning for your family member’s future, contact us – we’re here to help.