If your family includes a loved one with a disability, two tools can help you build savings without jeopardizing critical public benefits like Supplemental Security Income (SSI) and Medicaid: a special needs trust (SNT) and an ABLE account. Both offer meaningful protection, but they work differently -- and understanding those differences is the first step toward using them well.
How a Special Needs Trust Works
A special needs trust is a legal arrangement in which a trustee manages assets on behalf of a person with a disability. Because the assets are held in trust, they don't count toward the means-tested eligibility limits for public assistance programs.
Family members and friends can contribute to a third-party SNT with no annual cap. A first-party SNT -- funded by the person with a disability themselves -- is also an option, provided the beneficiary is under age 65.
An SNT is designed to pay for extras that enhance quality of life, not to replace benefits provided by government programs. Allowable expenses typically include:
- Medical equipment and medication not covered by public benefits
- Insurance premiums (health, dental, life)
- Therapy and rehabilitation services
- Caretaker or personal assistance payments
- Legal and guardianship expenses
- Education, job training, and school or camp tuition
- Home renovations for safety and accessibility
- Recreation, entertainment, and travel (including a companion's costs)
- Transportation, including a vehicle or rideshare
- Home appliances, electronics, and furniture
- Telephone and internet service
- Funeral and burial expenses
Notably, SNT funds generally cannot cover rent, mortgage payments, property taxes, homeowners insurance, or utilities -- expenses that overlap with what SSI is meant to address.
Key consideration: Because SNTs can be expensive to establish and require ongoing administration, working with a special needs planning attorney is essential to set one up correctly and keep it compliant.
How an ABLE Account Works
An ABLE account is a tax-advantaged savings account available to individuals whose disability was established before age 26. (Beginning in 2026, that age limit rises to 46.) Contributions can come from the account holder, family members, or friends -- and the funds grow and are distributed tax-free.
ABLE accounts cover a broader range of costs than an SNT. Allowable Qualified Disability Expenses (QDEs) include:
- Housing
- Transportation
- Education and employment training
- Assistive technology and related services
- Personal support services
- Health and wellness
- Legal fees and financial management
- Basic living expenses
- Funeral and burial expenses
This flexibility makes ABLE accounts particularly useful for day-to-day costs that an SNT cannot cover.
Three Key Differences
| Special Needs Trust | ABLE Account | |
|---|---|---|
| Eligibility | No age limit for third-party SNTs; first-party SNTs must be created before age 65 | Disability onset must be before age 26 (rising to 46 in 2026) |
| Annual contribution limit | None | Limited by federal tax code annually |
| Account maximum | None | Set by each state; many exceed $300,000, with the first $100,000 exempt from SSI impact |
| Allowable expenses | Extras that supplement -- not replace -- public benefits | Broader range, including basic living expenses |
| Setup complexity | More complex; requires an attorney | Simpler to open and manage |
This table is for general comparison only. Rules vary by state and individual circumstance.
Can You Use Both?
Yes -- and for many families, that's the right answer. An ABLE account can handle everyday expenses like housing and food, while an SNT covers larger or more specialized needs that public benefits don't address. Using them together gives you both flexibility and scope.
Find the Right Fit for Your Family
Every family's situation is different. The right strategy depends on your loved one's age, the source of the funds, the types of expenses you want to cover, and how you want the account managed over time. A special needs financial planner can walk through those variables with you and help you build a structure that protects both eligibility and quality of life.