Special Needs Trusts and ABLE Accounts: Planning for the Future

Special needs trusts and Achieving a Better Life Experience (ABLE or 529A) accounts can help provide for a disabled person’s financial future. If the parents of a disabled person pass away, or the disabled person loses their income, a special needs trust and an ABLE account can help provide income so they can keep getting federal benefits.

How a special needs trust works

If the parents of a disabled child set up a special needs trust, then all funds from the parents’ investments, properties, or other assets will go directly into the special needs trust after the parents’ death. The money from this trust will not count as income for the disabled person.

People with disabilities may get benefits from the United States government through programs such as Medicaid, Supplemental Security Income (SSI), and food stamps (SNAP). But there is a limit to how much money they can get each month to meet their needs for food and shelter.

For example, the current maximum amount of financial resources you can have to still receive SSI benefits each month is $2,000 for individuals and $3,000 for a couple. These resources are anything that you have that you could sell for cash to meet your needs, such as money in your bank accounts, bonds, or stocks. They do not include things like your home, the land you live on, or your car. If a disabled child loses their parents, any income they inherit may put them over the limit to get federal benefits, and they would no longer receive them.

But if the money that a disabled person inherits goes into a special needs trust, it will not count toward their limit to receive federal benefits such as Medicaid and SSI. This enables the disabled person to receive federal benefits and helps secure their financial future.

People who are self-employed but have disabilities can also set up a special needs trust for themselves in case their health declines and they can no longer work.

Setting up a special needs trust

Individuals can set up a special needs trust. A person with a disability or their parents should consult with a lawyer who understands how these trusts work. The adviser can talk to them about their situation and help them set up a special needs trust or ABLE account to obtain the most benefits. They may go over topics such as financial goals, the steps a person must take to meet them, and how the funds are used from the trust or account. 

How an ABLE account works

A person with a disability can also set up an ABLE account. These accounts are for people who develop a physical or mental disability before age 26 and receive SSI benefits. Programs for these accounts vary by state, so be aware of the rules in your state or discuss with a lawyer.

People with disabilities can save their money directly into the ABLE account so that it will not count toward their income limit to get other federal benefits. They can use this money for qualified disability expenses, including health care, education, housing, transportation, and other expenses.

A person with a disability can save up to $100,000 in their ABLE account before it affects their SSI benefits. The amount they can receive varies by state.

Funds from an ABLE account can be used for certain qualified disability expenses. These may include things such as:

• Food
• Housing
• Transportation
• Education
• Assistive devices and technologies
• Medical expenses
• Legal fees

Setting up an ABLE account

It is easy to open an ABLE account online. ABLE accounts can also be opened by:

• The person with the disability
• An authorized legal representative, attorney, or someone who represents the beneficiary (person receiving the funds), such as a parent, family member, or guardian.

The person setting up the account can select the type of ABLE account and how the funds are accessed. They supply their personal information and the bank account numbers where they would like to deposit the funds. Anyone can deposit money directly into the disabled person’s account.

To open an account, a person needs the following information:

• The name of the person in charge of the account (the owner)
• Personal information like the person’s date of birth, address, and Social Security number
• A driver’s license or state identification card
• Bank account numbers
• The disability code for a person’s condition
• A copy of a disability certification from the disabled person’s physician

Different plans may have different requirements, so check what is available and required in your state.