If you're looking for ways to save money or protect assets without losing SSI, Medicaid, or other benefits, you've probably come across two main options: ABLE accounts and special needs trusts. Both let you set aside money without it counting toward SSI's resource limit — but they work very differently and are designed for different situations. Choosing the right one (or both) can have a huge impact on your financial security.
In this article, we'll cover:
- How ABLE accounts and special needs trusts each work
- The key differences in cost, flexibility, and contribution limits
- How each option affects SSI, Medicaid, and other benefits
- When an ABLE account is the better choice
- When a special needs trust makes more sense
- Why many families use both together
ABLE Accounts: The Basics
An ABLE account is a tax-advantaged savings account for people with disabilities. To qualify, your disability must have had an onset before age 26 (with recent legislation expanding this to age 46). Money in an ABLE account is not counted as a resource for SSI purposes up to $100,000, and it has no impact on Medicaid eligibility at any balance.
You can contribute up to $20,000 per year from any source — your own income, gifts from family, or other funds. If you're employed, the ABLE to Work provision allows an additional contribution of approximately $15,650 from earned income. The account holder (the person with the disability) maintains direct control of the account and can withdraw funds at any time for qualified disability expenses.
ABLE accounts are relatively easy and inexpensive to set up. Most state programs allow you to open one online, and there are no attorney fees or court involvement required. Annual fees are typically low — often well under $100/year.
Special Needs Trusts: The Basics
A special needs trust (SNT) is a legal arrangement where a trustee manages assets on behalf of a person with disabilities. The assets in the trust don't count as resources for SSI or Medicaid, and the trustee distributes funds for the beneficiary's supplemental needs — things not covered by government benefits.
There are two main types. A first-party special needs trust (also called a d(4)(A) trust) is funded with the disabled person's own money, such as an inheritance, legal settlement, or back pay. These trusts require a Medicaid payback provision, meaning any funds remaining when the beneficiary passes away must first be used to reimburse Medicaid for benefits received. A third-party special needs trust is funded by someone other than the disabled person — typically a parent or grandparent. These trusts do not require Medicaid payback, and remaining funds can pass to other family members.
Setting up a special needs trust requires an attorney and typically costs between $2,000 and $10,000 or more, depending on the complexity. The trust must have a trustee (who may be a family member, professional, or institution) responsible for managing the funds and making distribution decisions.
Side-by-Side Comparison
When comparing these two tools, the differences become clearer. In terms of cost to set up, an ABLE account is low-cost or free, while a special needs trust involves attorney fees of $2,000 to $10,000 or more. For annual contributions, ABLE accounts are capped at $20,000 per year (plus the ABLE to Work additional amount), while special needs trusts have no annual contribution limit. On total asset capacity, ABLE accounts have no hard cap on balance, though the SSI resource exclusion applies to the first $100,000 — special needs trusts have no cap at all.
In terms of control, the ABLE account holder manages their own funds, while a special needs trust is managed by a trustee. For Medicaid payback, first-party special needs trusts require it, and ABLE accounts also require it for remaining balances at the account holder's death — but third-party special needs trusts do not. Regarding eligible expenses, ABLE accounts cover qualified disability expenses (a broad category), while special needs trusts cover supplemental needs not provided by government benefits.
One of the biggest practical differences is setup complexity. You can open an ABLE account in 15 minutes online. A special needs trust requires finding an attorney, drafting the trust document, going through potential court approval, and establishing a trustee relationship.
When an ABLE Account Is the Better Choice
An ABLE account is generally the better fit if you need a simple, low-cost way to save above the $2,000 SSI resource limit, you want direct control of your funds without relying on a trustee, you're saving relatively modest amounts (under $100,000), you want to save gradually over time from income or family contributions, or you need quick, easy access to funds for everyday disability-related expenses.
For many SSI recipients, an ABLE account is all they need. It solves the core problem — the inability to save — without the cost and complexity of a trust.
When a Special Needs Trust Makes More Sense
A special needs trust becomes the better option when larger sums are involved, when you're receiving a lump sum like a legal settlement, inheritance, or back pay that exceeds ABLE annual contribution limits, when a family member wants to leave assets to a person with disabilities without a Medicaid payback requirement (third-party trust), or when the person with the disability needs a trustee to manage funds on their behalf.
Special needs trusts are especially important for estate planning. If a parent or grandparent wants to include a child with disabilities in their will without jeopardizing benefits, a third-party special needs trust is often the best vehicle.
Using Both Together
Here's what many families don't realize: you don't have to choose one or the other. In fact, using an ABLE account and a special needs trust together is often the ideal strategy.
A common approach is to use a special needs trust as the primary vehicle for large assets — an inheritance, a legal settlement, or family contributions over time. The trust holds and invests the bulk of the funds, managed by a trustee. Then, the trustee makes periodic contributions to the beneficiary's ABLE account (up to the $20,000 annual limit), giving the beneficiary direct access to funds for day-to-day expenses while the trust handles the larger financial picture.
This combination gives you the best of both worlds: the flexibility and control of an ABLE account for everyday spending, plus the capacity and estate planning benefits of a trust for long-term financial security.
Understanding your options is the first step toward real financial security on disability benefits. Purple helps SSI and SSDI recipients manage their day-to-day finances and stay compliant with benefit rules — a natural complement to ABLE accounts and special needs trusts.