If you or a loved one receives disability benefits, figuring out how to save money without losing those benefits is one of the biggest financial challenges you'll face. Two of the most common tools for this are ABLE accounts and special needs trusts — and while they both help protect benefit eligibility, they work in very different ways. Choosing the right one (or using both) can make a real difference in your financial security.
In this article, we'll cover:
- What an ABLE account is and how it works
- What a special needs trust is and the different types available
- Key differences between ABLE accounts and special needs trusts
- The costs and complexity involved in each option
- When it makes sense to use one, the other, or both
- How each option interacts with SSI, Medicaid, and other benefits
What Is an ABLE Account?
An ABLE (Achieving a Better Life Experience) account is a tax-advantaged savings account created specifically for people with disabilities. Think of it as similar to a 529 college savings plan, but designed to cover disability-related expenses without jeopardizing your government benefits.
To be eligible for an ABLE account, you must have a disability with an onset before age 26. You don't need to be receiving SSI or SSDI to open one, but the account is especially valuable for people who do because of how it interacts with benefit rules.
In 2026, you can contribute up to $20,000 per year to an ABLE account. If you work and don't participate in an employer retirement plan, you may be able to contribute an additional amount (roughly $15,650 in 2026) through the ABLE to Work provision. The account balance can grow to $100,000 before it affects SSI eligibility — and even above $100,000, only your SSI cash payment is suspended, not your Medicaid coverage.
Money in an ABLE account can be used for a wide range of qualified disability expenses, including housing, transportation, education, health care, assistive technology, employment support, and basic living expenses. The account is straightforward to set up and manage — in most cases, you can open one online and make contributions and withdrawals yourself.
What Is a Special Needs Trust?
A special needs trust (SNT), sometimes called a supplemental needs trust, is a legal arrangement where a trustee holds and manages assets for the benefit of a person with a disability. The trust is designed so that the assets inside it don't count toward SSI's resource limit or affect other benefit eligibility.
There are two main types of special needs trusts. A first-party special needs trust (also called a d(4)(A) trust or self-settled trust) is funded with the disabled person's own assets — such as an inheritance, lawsuit settlement, or back pay from a disability claim. This type of trust requires a Medicaid payback provision, meaning that when the beneficiary passes away, any remaining funds must first repay Medicaid for services provided during the person's lifetime.
A third-party special needs trust is funded by someone else — typically parents, grandparents, or other family members. Because the money was never the disabled person's own asset, there's no Medicaid payback requirement. Any remaining funds after the beneficiary's death can pass to other family members or beneficiaries.
Key Differences
The most practical differences between ABLE accounts and special needs trusts come down to cost, control, and capacity.
An ABLE account is inexpensive and easy to set up. There are no attorney fees required, and many state ABLE programs charge minimal account maintenance fees. You (or the account owner) can manage contributions and withdrawals without involving a third party. However, the $20,000 annual contribution limit and the $100,000 SSI-friendly balance cap mean ABLE accounts are best suited for moderate savings.
A special needs trust requires an attorney to draft, which typically costs anywhere from $2,000 to $5,000 or more. You'll also need a trustee to manage the trust, which adds ongoing responsibility (and sometimes cost if you hire a professional trustee). The upside is that there's no cap on how much a trust can hold, making it the right vehicle for larger sums like an inheritance or legal settlement.
Another important distinction is who controls the money. With an ABLE account, the account holder (often the person with the disability) has direct control over spending. With a special needs trust, the trustee makes decisions about distributions, which can be an advantage if the beneficiary needs support with financial management but may feel restrictive.
How Each Affects Benefits
Both ABLE accounts and special needs trusts are designed to protect benefit eligibility, but the specifics differ.
For SSI purposes, the first $100,000 in an ABLE account is excluded from the $2,000 resource limit. Above $100,000, SSI cash benefits are suspended (but not terminated), and Medicaid continues. Contributions to an ABLE account from others don't count as income to the account holder in most cases.
Assets held in a properly structured special needs trust are generally not counted as resources for SSI or Medicaid purposes, regardless of the amount. However, distributions from the trust can sometimes be treated as income depending on how they're made. Cash given directly to the beneficiary typically counts as income, while payments made directly to third parties for goods and services generally don't. This is one area where having a knowledgeable trustee really matters.
When to Use Each Option
For most people with disabilities who want to save modest amounts — maybe setting aside a portion of their benefits each month or receiving small gifts from family — an ABLE account is usually the best starting point. It's simple, affordable, and gives you direct control over your money.
A special needs trust becomes important when larger sums of money are involved. If you're expecting an inheritance, receiving a legal settlement, or if family members want to leave you assets in their estate plan, a trust can protect those funds without the contribution limits that apply to ABLE accounts.
Many families use both. An ABLE account handles day-to-day saving and spending flexibility, while a special needs trust manages larger assets and long-term financial planning. The two tools complement each other well.
Getting Started
If you're considering an ABLE account, the first step is checking whether your state offers a program — and many states allow residents of any state to enroll. Compare fees, investment options, and features across different state programs to find the best fit.
For a special needs trust, you'll want to work with an attorney who specializes in disability or elder law. The details of how the trust is structured matter significantly for benefit protection, so this isn't an area to cut corners.
Building financial security while protecting your benefits requires the right tools. Purple offers ABLE accounts and checking accounts designed for people on SSI and SSDI, helping you save and spend with confidence.