When you're trying to protect assets while maintaining eligibility for disability benefits, two main options exist: ABLE accounts and special needs trusts. Both let you hold money without losing SSI or Medicaid, but they work very differently. Understanding the distinctions can help you choose the right tool—or decide whether you need both.
In this article, we'll cover:
- What ABLE accounts and special needs trusts are
- Key differences in eligibility and setup
- How contribution limits compare
- Who controls the money in each
- What happens to the money when you die
- When to use one, the other, or both
Understanding the Two Options
ABLE accounts are tax-advantaged savings accounts created under the ABLE Act of 2014. They work similarly to 529 college savings plans but are designed for disability-related expenses. You open an ABLE account through a state program, contribute money (up to annual limits), and can use the funds for qualified disability expenses. The money grows tax-free, and up to $100,000 doesn't count against SSI's resource limit.
Special needs trusts (SNTs) are legal arrangements where assets are held by a trustee for the benefit of a person with a disability. There are two main types: first-party trusts (funded with the beneficiary's own money, like a lawsuit settlement or inheritance) and third-party trusts (funded with other people's money, like parents setting aside assets for their child). The trustee manages the money and makes decisions about distributions.
Both tools protect benefits eligibility, but they have very different rules, costs, and levels of control.
Eligibility Differences
ABLE accounts have specific eligibility requirements. As of 2026, your disability must have begun before age 46 (expanded from the previous limit of age 26). You must either receive SSI or SSDI based on disability, or have a physician certify that you have a qualifying disability. You can only have one ABLE account at a time.
Special needs trusts have more flexible eligibility rules. Third-party trusts can be created for anyone with a disability, regardless of when it began. First-party trusts have an age limit—they must be established before the beneficiary turns 65—but this is still higher than the ABLE age limit, and there's no requirement that the disability began before a certain age. You can have multiple special needs trusts.
Setup Costs and Complexity
ABLE accounts are simple and inexpensive to open. You apply online through a state ABLE program (you can use any state that accepts non-residents), pay modest annual fees (typically $25-$50), and the account is ready to use. No attorney required.
Special needs trusts require legal drafting and typically cost $2,000 to $5,000 or more to establish, depending on complexity. You'll need an attorney experienced in special needs planning. Ongoing administration may also require professional help, adding to costs. First-party trusts must include specific language required by federal law. Third-party trusts have more flexibility but still require careful drafting.
If you need a simple way to save relatively small amounts, the ABLE account's low cost and ease of setup is a significant advantage.
Contribution and Balance Limits
ABLE accounts have clear limits. Annual contributions are capped at $20,000 in 2026 (tied to the gift tax exclusion). If you work and don't have an employer retirement plan, you can contribute an additional amount equal to the federal poverty line (approximately $15,650 in 2026 for most states). While there's no hard cap on total balance, if your ABLE account exceeds $100,000, your SSI payments are suspended (though you keep Medicaid eligibility) until the balance drops below that threshold.
Special needs trusts have no contribution limits. You can fund a trust with any amount—whether that's a $50,000 settlement or a $2 million inheritance. There's no cap on the balance, and regardless of how much is in the trust, your SSI and Medicaid eligibility remains intact (assuming the trust is properly drafted and administered).
For large sums of money—like an inheritance, lawsuit settlement, or significant family gifts—a special needs trust can hold far more than an ABLE account allows.
Control and Access
This is where the two options differ most dramatically.
ABLE accounts put you in control. As the account owner, you decide how to invest the money (choosing from the options your state program offers), when to make withdrawals, and what to spend it on (within the qualified disability expenses guidelines). You can use a debit card linked to the account for everyday purchases. No one needs to approve your spending decisions.
Special needs trusts put the trustee in control. The trustee (who might be a family member, professional fiduciary, or institution) decides whether and when to make distributions. The beneficiary typically can't access funds directly—they must request money from the trustee, who then decides if the expenditure is appropriate. This provides protection against impulsive spending or financial exploitation, but it means less autonomy.
For people who value independence and want to manage their own finances, ABLE accounts offer much more freedom. For people who need or want oversight—or whose families are concerned about their ability to manage money responsibly—a trust provides built-in protection.
What You Can Spend On
ABLE accounts can be used for "qualified disability expenses," which are broadly defined. This includes housing (rent, mortgage, utilities), education, transportation, employment support, assistive technology, healthcare, personal support services, financial management, legal fees, and basic living expenses. The category is intentionally wide.
Special needs trusts can generally be used for anything that benefits the beneficiary—not just disability-related expenses. However, there's an important catch: if a special needs trust pays for food or housing directly, it may be considered "in-kind support and maintenance," which can reduce SSI benefits by up to one-third. ABLE accounts don't have this problem; housing payments from an ABLE account don't reduce SSI.
This makes ABLE accounts particularly useful for housing-related expenses if you want to avoid any SSI reduction.
What Happens After Death
ABLE accounts are subject to Medicaid payback. When the account owner dies, any remaining funds must first reimburse the state for Medicaid benefits received after the ABLE account was opened. Only after this payback can remaining funds pass to heirs. If the account owner never received Medicaid, there's no payback requirement.
Special needs trusts vary. First-party trusts (funded with the beneficiary's own money) are also subject to Medicaid payback—any remaining funds reimburse the state for lifetime Medicaid benefits. Third-party trusts (funded with other people's money) are not subject to Medicaid payback. When the beneficiary dies, remaining assets can pass to other family members or anyone else the trust creator designated.
If avoiding Medicaid payback is important and the funds are coming from family rather than the beneficiary's own assets, a third-party special needs trust has a significant advantage.
When to Use Each Option
Choose an ABLE account when: You want direct control over your money. You're saving modest amounts (under $100,000). You need to pay for housing without reducing SSI. You want low cost and simple setup. You became disabled before age 46.
Choose a special needs trust when: You're receiving a large settlement, inheritance, or gift. You want maximum flexibility with no contribution limits. You need or want trustee oversight. You became disabled after age 45 (for a third-party trust). You want remaining funds to pass to family without Medicaid payback (third-party trust only).
Use both when: You have a large amount to protect (put most in the trust) but want accessible funds you control (keep some in ABLE). Your trust can actually contribute to your ABLE account, giving you a checking-like tool funded by the trust.
Managing your day-to-day finances works best with the right checking account. Purple is built for people on SSI and SSDI, helping you track resources and stay compliant whether you're using an ABLE account, a special needs trust, or both.