When planning for the future, it’s crucial to understand the various tools available to protect the financial security of individuals with disabilities while maintaining their eligibility for public assistance programs. Two powerful tools are Special Needs Trusts (SNTs) and ABLE ccounts. Both play vital roles in ensuring that individuals with disabilities can preserve assets without jeopardizing access to essential benefits like Medicaid and Supplemental Security Income (SSI).
Let’s explore these options, along with the programs they interact with, and the nuances that come with them.
Public Assistance Programs and Asset Limits
Public assistance programs like SSI, Medicaid, and Medicaid Waiver Programs serve as lifelines for many individuals with disabilities, providing income and medical coverage. However, eligibility for these programs often comes with stringent asset and income limits.
- SSI: Supplemental Security Income is a needs-based program that provides monthly payments to individuals with disabilities. To qualify, individuals must meet strict income and asset limits, with resources typically capped at $2,000.
- SSDI: Social Security Disability Insurance, unlike SSI, is not means-tested and is based on work credits. This program doesn’t have the same asset limits, but it does impact eligibility for other need-based programs.
- Medicaid: This program provides critical health care coverage for individuals with disabilities. Like SSI, Medicaid eligibility is tied to financial resources, and many states have asset limits similar to SSI.
For individuals receiving these benefits, exceeding the asset limits can lead to a loss of eligibility. This is where Special Needs Trusts and ABLE accounts come into play, allowing individuals to preserve assets while still qualifying for benefits.
Special Needs Trusts: Protecting Assets Without Losing Benefits
SNTs are a well-established method for protecting assets for the benefit of individuals with disabilities. These trusts are designed to supplement—not replace—public assistance benefits, providing for extra needs that improve the individual’s quality of life without disqualifying them from programs like SSI or Medicaid.
Key Types of SNTs:
- First-Party SNTs: Funded by the beneficiary’s assets (e.g., an inheritance or injury award). After death, Medicaid must be reimbursed.
- Third-Party SNTs: Funded by someone other than the beneficiary. No Medicaid payback is required after death.
- Pooled Trusts: Managed by nonprofits, pooled trusts are ideal for those with smaller estates.
Each type of Special Needs Trust has its own set of rules and advantages, and the choice of trust depends largely on the source of the funds being protected and the needs of the individual beneficiary.
ABLE Accounts: An Innovative Savings Tool
ABLE (Achieving a Better Life Experience) accounts are a relatively new financial tool that offers individuals with disabilities a tax-advantaged way to save money while maintaining eligibility for public assistance programs. Signed into law in 2014, ABLE accounts function much like 529 college savings plans, but with a focus on disability-related expenses.
Key Features of ABLE Accounts:
- Tax-Free Growth: Funds in an ABLE account grow tax-free as long as they are used for Qualified Disability Expenses (QDEs). These include costs related to education, housing, transportation, health care, and other disability-related needs.
- Contribution Limits: Contributions to an ABLE account are limited to the annual federal gift tax exclusion ($19,000 in 2025). However, individuals who are employed may be eligible to contribute additional amounts beyond this limit.
- Asset Limits: While the first $100,000 in an ABLE account is exempt from the SSI resource limit, any amount over that threshold could impact SSI benefits. Importantly, Medicaid eligibility is not affected by ABLE account balances up to the state’s 529 plan limit ($418,000 in Florida).
Unlike Special Needs Trusts, ABLE accounts allow individuals with disabilities to manage and control their own funds, offering a level of financial independence that is not always possible with a trust. However, ABLE accounts do come with some restrictions—such as the requirement that the beneficiary’s disability must have occurred before age 26, though this will increase to age 46 in 2026.
Choosing Between a Special Needs Trust and an ABLE Account
For many families, the decision is not whether to choose one or the other, but how to use both Special Needs Trusts and ABLE accounts in a complementary way. Trusts offer greater flexibility in the types of funds that can be held and are not subject to the same contribution limits as ABLE accounts. On the other hand, ABLE accounts offer the advantage of allowing tax-free growth on savings for disability-related expenses and provide the beneficiary with more direct control.
Ultimately, both tools can be essential components of a comprehensive financial plan for individuals with disabilities. Families should carefully consider the benefits and limitations of each and seek professional guidance when establishing either.
Travis Finchum has been practicing law since 1996 and has been a Board-Certified Elder Law attorney since 2002. He is the president and founder of the law firm Special Needs Lawyers, P.A., and an ABLE United board member.
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