Families with disabled loved ones face unique financial planning challenges. You want to provide support without jeopardizing eligibility for government benefits like Supplemental Security Income (SSI) or Medicaid. Two popular options exist: ABLE accounts and special needs trusts. Each serves different purposes, and many families benefit from using both.
What An ABLE Account Is
ABLE accounts were created under federal law in 2014. They allow individuals with disabilities to save money in a tax-advantaged account without losing means-tested benefits. The person with the disability owns the account and controls how the money gets spent. To qualify, your disability must have started before age 26. You can only have one ABLE account, and annual contributions are limited to $18,000 in 2024 (the same as the gift tax exclusion amount). Total account balances over $100,000 may affect SSI payments, though you won’t lose eligibility entirely. ABLE accounts work well for covering qualified disability expenses like:
- Housing and transportation
- Education and job training
- Health care and therapy
- Assistive technology
- Personal support services
The money grows tax-free, and withdrawals for qualified expenses aren’t taxed. You can make contributions yourself, and family members can contribute too. A Bellevue special needs trust lawyer can review your situation and recommend the best approach. T
How Special Needs Trusts Work Differently
A special needs trust (SNT) is a legal arrangement where a trustee manages assets for someone with disabilities. The beneficiary doesn’t own or control the assets directly, which keeps them from counting against benefit eligibility limits. Unlike ABLE accounts, special needs trusts have no contribution limits. You can fund them with any amount, making them ideal for larger inheritances, life insurance proceeds, or lawsuit settlements. A Bellevue special needs trust lawyer can help you establish the right type of trust for your situation.
There are two main categories. First-party SNTs hold the disabled person’s own money, often from an injury settlement. Third-party SNTs are funded by someone else, typically parents or grandparents planning their estates. Third-party trusts offer more flexibility. When the beneficiary passes away, the remaining funds can go to other family members. With first-party trusts, Medicaid may claim reimbursement for services provided during the beneficiary’s lifetime.
Comparing Key Differences
The eligibility requirements differ significantly. ABLE accounts require disability onset before age 26. Special needs trusts have no age restrictions, making them useful for people who become disabled later in life or were born before ABLE accounts existed. Control is another major distinction. The ABLE account holder manages their own funds and makes spending decisions. With a trust, the trustee controls distributions. This can be beneficial if the beneficiary lacks financial management skills or might make choices that risk benefit eligibility. Cost matters too. Opening an ABLE account costs little to nothing, with minimal ongoing fees. Setting up a special needs trust requires legal assistance, and you’ll need to pay trustee fees if you choose a professional trustee rather than a family member.
When To Use Each Option
ABLE accounts work well for everyday expenses and smaller amounts of money. They give the person with disabilities independence and control. They’re particularly useful for working individuals who want to save employment income. Special needs trusts make more sense for substantial assets. If you’re leaving an inheritance to a disabled child, a trust protects unlimited funds. Estate planning for families typically includes third-party special needs trusts as part of comprehensive planning.
Many families use both. An ABLE account handles routine expenses that the beneficiary manages themselves. A special needs trust holds larger assets and covers major expenses that the trustee approves. Eastside Estate Planning helps Washington families create disability plans that protect loved ones and preserve benefit eligibility. Whether you need an ABLE account, a trust, or both depends on your specific circumstances.
