A Comparison of Special Needs Trusts and ABLE Accounts

A special needs trust (SNT) and an Achieving a Better Life Experience (ABLE) account each provide a tax-free way for people with disabilities to save money. Both options provide a mechanism for saving money and protecting resources that ensures the disabled individual remains eligible for public benefits. Accumulating resources without jeopardizing key government benefits like Supplemental Security Income (SSI) and Medicaid can reduce monetary pressures and greatly enhance the lives of those with disabilities.

Deciding Which Is Best

Significant differences exist between the saving rules of an ABLE account and special needs trust (may be referred to as supplemental needs trust if not created with assets not owned by the beneficiary). Each also has different rules regarding the use of the savings and different annual limits on the amount you can save.

Your unique circumstances can directly impact each saving strategy type. This is why understanding how to set up and manage the best option for you is crucial. A special needs planning attorney can explain whether one or the other – or both – account types can work for your situation.

ABLE accounts tend to be easier to create and manage, yet they have some drawbacks. One downside is the limit on the contribution you can make annually.

A special needs trust has no contribution limits. However, it can be expensive to create and typically more complex to manage.

The advantage of having both is that an ABLE account can pay for everyday expenses, while a special needs trust can cover those larger purchases that public benefits do not cover.

Special Needs Trust

Most public assistance programs are means-tested, meaning they have asset and income restrictions an applicant must meet. If a disabled individual has too much money in their savings or earns too much money, they may not qualify for these benefits.

Using a special needs (SNT) allows a workaround for these restrictions. The money put into the trust won’t count toward the eligibility qualification for public assistance. It is permissible for family and friends to contribute financially to the beneficiary’s SNT.

A special needs trust is a legal arrangement and a fiduciary relationship with a person or entity acting on behalf of another to manage these assets. Establishing an SNT can benefit both parties beyond the protection of public benefits. The creator of the trust, called the grantor, has assurance that trust proceeds will go to the expenses as stipulated. Creditors and legal judgments also can’t seize the trust assets.

Several types of special needs trusts exist. For example, if the beneficiary can financially contribute to a trust for themselves and is under 65, a special needs planning lawyer can create an SNT known as a first-party special needs trust (self-settled SNT). (Read more in a related article about first-party, third-party, and pooled SNTs.)

However, the money in an SNT can only fund a limited range of expenses. A special needs planner can clarify which expenditures from the SNT conflict with government eligibility regulations for benefits programs. These funds may not cover certain basic living expenses, but can pay for the following:

• Medical equipment and medication that public benefits do not cover
• Insurance premiums (health, dental, life, etc.)
• Therapy or rehabilitation services
• Caretaker or personal assistance payments
• Legal or guardianship expenses
• Education (school) and job training
• Home renovations that improve safety and accessibility
• Case management or private counseling
• Recreation or entertainment tickets
• Home appliances, electronic equipment, and furniture
• Clothing
• School or camp tuition
• Telephone service and internet access
• Transportation, including a vehicle, rideshare, or bus/rail pass
• Travel/vacation (including the cost of a companion)
• Funeral and burial expenses

The list generally excludes rent or mortgage payments, property taxes, homeowners insurance dues, homeowners insurance, and utilities like gas, electricity, and water.

Achieving a Better Life Experience Account (ABLE)

This type of savings account still provides a tax advantage for a disabled beneficiary, but it is currently available only to individuals whose disability was established before age 26. It is permissible for friends, family members, and the beneficiary to contribute to the account. The money accrued in an ABLE account won’t affect a person’s eligibility for public benefits programs.

While the ABLE account contributions are not tax-deductible, the funds that grow within the account are tax-free, as are the distributions. An ABLE account is a newer financial product in comparison to an SNT. Its policy goal was to give more individuals with disabilities access to more benefits that previously were available only to those with a special needs trust.

Additionally, the monies in ABLE accounts can pay for a wider range of costs than an SNT. These expenses are known as Qualified Disability Expenses (QDEs). Funds in an ABLE account can cover such expenses as:

• Housing
• Transportation
• Education
• Employment training and support
• Assistive technology and its related services
• Personal support services
• Prevention and wellness
• Health
• Legal fees
• Financial management and administrative services
• Basic living expenses
• Expenses for ABLE account monitoring and oversight
• Funeral and burial expenses

3 Key Differences

The three key differences between SNTs and ABLE accounts are eligibility, allowable expenses in each account type, and limits on the money you can save.

Eligibility

ABLE accounts are available only to persons with a disability onset before age 26 as determined by the Social Security Administration's criteria. (This age limit will adjust to age 46 in 2026.)

There are no age limits in creating a third-party SNT, but funding can't include the beneficiary. A first-party SNT is self-funded by the person with a disability but must be created before they reach age 65.

Allowable Expenses

An SNT's design is to pay for extra things that make life more comfortable, like vacations, pets, home furnishings, and entertainment, without covering any benefit paid for by a public assistance program. If an SNT does pay for such benefits, the beneficiary may see a reduction or elimination of public benefits.

ABLE account allowable expenses have a broader range. Anything that helps a person with a disability to improve their independence, health, or quality of life is acceptable. QDEs can include basic living costs such as education, food, employment, technology, and more.

Account Limits

ABLE accounts have amount and contribution limits. Contribution amounts are finite for each year and are under federal tax code governance. Additionally, ABLE accounts have a maximum limit set by the states that manage them. Many states have a maximum limit set above $300,000, with only the first $100,000 exempt from impacting eligibility for Supplemental Security Income.

A special needs trust has no such limits; however, they can be more expensive to create.

Work With a Special Needs Planning Attorney

Every family has different needs and circumstances when assessing whether an SNT or ABLE account (or both) is the better option for their loved one with disabilities. It may make sense to use each option for different purposes.

A special needs planning attorney near you can assess your financial situation and the needs of your loved one with disabilities to find the right solution.