Managing assets with multiple options: The Special Needs Trust and the ABLE Account

I’m gonna keep my words on this basic since I am listing many resources at the bottom.

When you apply for government assistance, they look at your money from 2 angles:

  • Income – money you receive
  • Assets – money and other items of value that you own at the end of the month

Several financial tools to help qualifying for Medicaid and Social Security SSI have been created:

  • The Special Needs Trust is a tool for a third party (family and friends) to set aside money to help a person with Special Needs but this money NOT becoming income or an asset for the person.
  • The ABLE Account is a tool for an individual to set aside their own money without it counting as an asset for the individual. However, income received by the designated beneficiary and deposited into his or her ABLE account is income to the designated beneficiary.

The Special Needs Trust is a place to leave your inheritance to your child or grandchild if they are an individual who will need to qualify for Medicaid and/or SSI.

The ABLE Account is an account where the individual who needs to qualify can save money they receive without this savings making them exceed the asset limit for Medicaid and/or SSI.


The ABLE Act is a federal law (passed in December of 2014 and amended via H.R. 2029, the Consolidated Appropriations Act of 2016) that amended the Internal Revenue Service Code to create a tax-advantaged savings option for people with disabilities.

On May 30, 2015, Texas enabled its version of the Act (SB 1664, Perry). For the first time in history, Texans with disabilities can save money (in their own name) to pay for certain disability expenses without the fear of exceeding the Medicaid individual resource limit of $2,000.

How does the program work?

Each year, an account beneficiary can save a total combined amount of $14,000 into an individual Texas ABLE account. The funds can come from earned wages, a family member, a friend, or any other source.

For example, a person with a Texas ABLE account might earn $6,000 throughout the year beyond their personal expenses. They could save that money in their Texas ABLE account. In addition, a grandparent might wish to put another $6,000 into the account, and the beneficiary’s parents might add another $2,000 to reach the $14,000 maximum deposit limit. No more money could be deposited into that account that year.


“Should I use a special needs trust or an ABLE account to safeguard my money [for my special needs beneficiary]?”

There’s no simple answer to this question, because it involves looking at a number of different factors, but below are 5 key areas to consider, along with a brief description of whether a special needs trust or an ABLE account gets the edge in that particular area.

1. Amount that can be safeguarded without impacting benefits

Edge to special needs trusts – Unlimited amounts can be left/gifted to a 3rd party special needs trust without impacted federal/state benefits. On the other hand, SSI benefits will be suspended once an ABLE account’s value exceeds $100,000. In addition, there is no limit on the amount of funds that can be bequeathed/gifted to a special needs trust, whereas ABLE account contributions are limited to $15,000 per year.

2. Potential uses of funds

Slight edge to special needs trusts – While the definition of qualifying disability expenses for ABLE accounts is fairly liberal, special needs trusts drafted with the appropriate language can allow for an even broader array of expenses.

3. Tax efficiency

Edge to ABLE accounts – Any income that is generated by a special needs trust and not paid out of the trust to trust beneficiaries within the accounting year is subject to the brutal trust tax rates. In contrast, distributions from ABLE accounts, including earnings, will be entirely tax free if used for qualified disability expenses.

4. Legacy to future beneficiaries

Edge to special needs trusts – Any amounts left in a person’s ABLE account at the time of their death will first be used to repay publicly provided benefits. That will probably wipe out the balance in most of those accounts. In contrast, if a special needs trust is established and implemented properly, the trust assets at the time of the special needs person’s death can be left to other heirs.

5. Cost and complexity

Edge to ABLE accounts – Trusts can be very expensive to create and administer. They also add a lot of complexity. ABLE accounts, on the other hand, will have minimal expenses and will be far simpler to implement. ABLE accounts are not required to file tax returns (like trusts are), and the income earned in the account will generally not be subject to income taxes.


The “ABLE” account is a relatively new planning tool that offers an individual with disabilities a tax-free savings option (similar to a 529 College Savings Plan) that does not interfere with the individual’s eligibility for means-tested government benefits, such as Supplemental Security Income (SSI) and Medicaid. Special needs trusts (SNTs) are well-established savings tools that also protect eligibility for public programs.

Contribution Limits

Total lifetime contributions to an ABLE account are tied to each provider state’s limit on total contributions to its 529 College Savings Plan. State limits vary from approximately $250,000 to $450,000. In light of the annual contribution limit of $14,000, these lifetime limits would not be reached

Use of Funds

An SNT, at the trustee’s discretion, may pay for anything that benefits the beneficiary alone─ other than food and housing─ without affecting government benefits. If the beneficiary is an SSI recipient, food and housing expenditures are considered in-kind support (ISM) and will reduce payments from that program.

An ABLE account may pay for the beneficiary’s “qualified disability expenses” (QDEs) to maintain or improve the health, independence, or quality of life of the beneficiary. This includes basic living expenses, education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services. The ability to pay for housing without affecting SSI is an attractive benefit of ABLE accounts. More categories may be added by further regulations.

ABLE Accounts and SNTs: How to Choose?
  • You don’t have to open the ABLE account in the state you live in. For many years, Texas did not have a program established but Texans could establish accounts in other states.
    • Ohio STABLE is open for nationwide enrollment and can be opened fully online:
    • Texas ABLE Program just opened for enrollment in 2018: