If you or a loved one receives disability benefits, you've probably heard that saving money can put those benefits at risk. Both ABLE accounts and Special Needs Trusts offer ways to save without losing SSI or Medicaid—but they work very differently.
In this article, we'll cover:
- How ABLE accounts work
- How Special Needs Trusts work
- Key differences between the two
- Which option might be right for your situation
- How Purple supports ABLE account holders
1. What Is an ABLE Account?
An ABLE (Achieving a Better Life Experience) account is a tax-advantaged savings account for people with disabilities that began before age 26. It works similarly to a 529 college savings plan but can be used for a much wider range of expenses.
Key features of ABLE accounts:
- You can save up to $18,000 per year (2024 limit)
- Account balances up to $100,000 don't count against SSI's $2,000 asset limit
- Earnings grow tax-free when used for qualified expenses
- The account holder controls their own money
- Funds can be used for housing, transportation, education, healthcare, and more
Important: Only individuals whose disability began before age 26 are eligible to open an ABLE account. This age requirement may change in the future, so check current guidelines.
2. What Is a Special Needs Trust?
A Special Needs Trust (SNT) is a legal arrangement where a trustee manages assets on behalf of a person with disabilities. There are two main types:
First-Party (Self-Settled) Trusts:
- Funded with the beneficiary's own money (like an inheritance or settlement)
- Must be established before age 65
- Requires Medicaid payback after the beneficiary passes away
Third-Party Trusts:
- Funded by family members or others (not the beneficiary's own assets)
- No age restrictions
- No Medicaid payback requirement
- Can be established through a will
Both types require a trustee to manage the funds and make distribution decisions.
3. Key Differences Between ABLE Accounts and SNTs
Understanding the differences helps you choose the right option:
| Feature | ABLE Account | Special Needs Trust | |---------|--------------|---------------------| | Who controls funds | Account holder | Trustee | | Setup cost | Low (often free) | High (attorney fees) | | Annual contribution limit | $18,000 | No limit | | Asset limit protection | Up to $100,000 for SSI | Unlimited | | Age requirement | Disability before 26 | Varies by type | | Medicaid payback | Yes, on remaining funds | Only for first-party |
4. Which Option Is Right for You?
The best choice depends on your specific circumstances.
An ABLE account might be better if you:
- Want direct control over your savings
- Are saving smaller amounts (under $100,000)
- Need flexibility to access funds easily
- Want to avoid attorney fees and trustee management
- Your disability began before age 26
A Special Needs Trust might be better if you:
- Need to protect a large inheritance or settlement
- Want unlimited asset protection
- Need a third party to manage funds
- Don't meet ABLE account eligibility requirements
- Want family members to contribute substantial amounts
Important: You don't have to choose just one. Many people use both an ABLE account for day-to-day savings and a Special Needs Trust for larger assets.
5. Using Both Together
ABLE accounts and Special Needs Trusts can work together as part of a comprehensive financial plan.
For example:
- A Special Needs Trust holds a large inheritance
- The trustee transfers up to $18,000 annually into an ABLE account
- The beneficiary uses their ABLE account for regular expenses they control
- Larger purchases are made directly from the trust
This approach maximizes flexibility while protecting larger assets.
6. How Purple Supports ABLE Account Holders
Purple makes managing your ABLE account alongside your everyday finances simple and intuitive.
With Purple, you can:
- Link your ABLE account for a complete picture of your finances
- Track spending categories that align with qualified ABLE expenses
- Monitor your SSI asset limits with built-in resource tracking
- Set savings goals and watch your progress
- Access your account information anytime through our accessible app
Purple's benefit-friendly features help you save confidently without worrying about accidentally exceeding limits.
Take the Next Step
Whether you choose an ABLE account, a Special Needs Trust, or both, the important thing is having a plan to save for your future without risking your benefits.
Purple is here to help you manage your finances with confidence. Open your free account today and see how disability-friendly banking can support your financial goals.