If you or a loved one receives SSI or other means-tested benefits, saving money without jeopardizing those benefits can feel like an impossible puzzle. Two of the most common tools for protecting assets are ABLE accounts and special needs trusts, but they work very differently and choosing the right one (or both) can make a real difference in your financial life.
In this article, we'll cover:
- What ABLE accounts are and how they work
- What special needs trusts are and the different types available
- Key differences between ABLE accounts and special needs trusts
- Who qualifies for each option
- How each one affects SSI, Medicaid, and other benefits
- When it makes sense to use one, the other, or both
What Is an ABLE Account?
An ABLE (Achieving a Better Life Experience) account is a tax-advantaged savings account specifically designed for people with disabilities. Created under the ABLE Act of 2014, these accounts allow eligible individuals to save money without it counting toward the $2,000 SSI resource limit (or $3,000 for couples).
ABLE accounts are relatively simple to open and manage. You can contribute up to $20,000 per year (and if the account holder is working, they may be able to contribute an additional ~$15,650 through the ABLE to Work provision). The funds in an ABLE account can be used for a wide range of disability-related expenses, including housing, transportation, education, assistive technology, health care, and basic living expenses.
One important eligibility requirement: the account holder's disability must have begun before age 26. Thanks to recent legislative changes, this age threshold has increased from the original age 26 to age 46 starting in 2026, which will open the door for millions more people.
The account holder owns and controls the ABLE account directly, which gives them independence and autonomy over their funds. Earnings in the account grow tax-free as long as they're used for qualified disability expenses.
What Is a Special Needs Trust?
A special needs trust (sometimes called a supplemental needs trust) is a legal arrangement where a trustee holds and manages assets on behalf of a person with a disability. The trust is designed so that the assets inside it don't count as resources for purposes of SSI, Medicaid, and other means-tested programs.
There are two main types of special needs trusts. A first-party special needs trust (also called a d4A trust) is funded with the disabled person's own money, such as an inheritance, lawsuit settlement, or back pay from benefits. Federal law requires that when the beneficiary passes away, any remaining funds in a first-party trust must be used to reimburse Medicaid for benefits paid during the person's lifetime. This is known as the Medicaid payback provision.
A third-party special needs trust is funded by someone other than the beneficiary, like a parent, grandparent, or other family member. Because the money was never the disabled person's asset, there is no Medicaid payback requirement. Any remaining funds can pass to other family members or beneficiaries after the disabled person's death.
Special needs trusts require an attorney to set up, and they typically involve ongoing legal and administrative costs. A trustee, whether a family member, professional, or organization, manages the funds and makes distributions on behalf of the beneficiary.
Key Differences Between ABLE Accounts and Special Needs Trusts
The most immediate practical difference is simplicity and cost. Opening an ABLE account can often be done online in a matter of minutes with minimal fees. Setting up a special needs trust requires hiring an attorney, which can cost anywhere from $2,000 to $10,000 or more, plus ongoing trustee and administrative fees.
Control is another major distinction. With an ABLE account, the person with a disability typically manages their own account and decides how to spend the funds. With a special needs trust, a trustee controls the money and makes spending decisions, though ideally in consultation with the beneficiary.
When it comes to how much you can save, special needs trusts have no contribution limits or balance caps for purposes of SSI eligibility. ABLE accounts, on the other hand, are capped at $20,000 in annual contributions, and if the account balance exceeds $100,000, SSI cash benefits are suspended (though Medicaid continues). For people who need to protect larger sums, like a lawsuit settlement or significant inheritance, a special needs trust may be the better vehicle.
The Medicaid payback rule also matters. First-party special needs trusts and ABLE accounts both have a Medicaid payback provision, meaning the state can reclaim Medicaid costs from remaining funds after the beneficiary dies. Third-party special needs trusts do not have this requirement, making them a better option for families who want remaining assets to pass to other heirs.
Who Qualifies for Each?
For ABLE accounts, the primary eligibility requirement is that the individual's disability must have begun before age 26 (expanding to age 46 in 2026). The person must also be receiving SSI or SSDI, or be able to certify that they have a significant disability that meets Social Security's criteria.
Special needs trusts have no age-of-onset requirement. Anyone with a disability who receives means-tested benefits can be the beneficiary of a special needs trust, regardless of when their disability began. This makes trusts the only option for people whose disabilities began later in life and who don't yet qualify under the expanded ABLE age threshold.
How Each Affects Your Benefits
Both ABLE accounts and properly structured special needs trusts are designed to protect eligibility for SSI, Medicaid, SNAP, and other means-tested programs. However, the details differ.
With an ABLE account, balances up to $100,000 are excluded from the SSI resource limit. If the balance goes above $100,000, SSI payments are suspended but Medicaid coverage continues. Distributions used for housing expenses (like rent or mortgage payments) may be treated differently than other qualified expenses for SSI purposes.
With a special needs trust, assets held in the trust are generally not counted toward the SSI resource limit regardless of the balance. However, distributions made directly to the beneficiary as cash can be counted as income, so trustees typically pay vendors directly for goods and services rather than giving cash to the beneficiary.
When to Use One, the Other, or Both
For many people, an ABLE account is the right starting point. If you need a simple, flexible way to save modest amounts without jeopardizing your benefits, and you meet the age-of-onset requirement, an ABLE account gives you independence and ease of use that's hard to beat.
A special needs trust makes more sense when larger sums of money are involved, when the person's disability began after the ABLE age threshold, or when a family wants to set up long-term financial planning that avoids Medicaid payback (through a third-party trust). Trusts are also useful when a professional trustee can provide financial management for someone who needs that support.
Many families find that using both is the best approach. A special needs trust can hold larger assets and provide long-term financial security, while an ABLE account gives the beneficiary day-to-day control over a portion of their funds for everyday expenses. The trust can even make contributions into the ABLE account up to the annual limit.
The right choice depends on your specific situation, including how much money is involved, when the disability began, who is providing the funds, and how much control the beneficiary wants over spending decisions. Consulting with a disability benefits planner or special needs attorney can help you map out the best strategy.
Protecting your savings while keeping your benefits shouldn't require a law degree. Purple's checking account is designed for SSI and SSDI recipients, with built-in tools to help you track your resources and stay compliant with benefit rules.