Every time I give a parent-group talk on special-needs planning, the same question comes up in the Q&A: "Do we really need a trust if we have an ABLE account?" The answer is almost always yes, and almost always both. Here is why.
What an ABLE Account Does
An ABLE (Achieving a Better Life Experience) account, authorized under Section 529A of the Internal Revenue Code and adopted by every state, allows a person whose disability began before age 26 — expanding to age 46 in 2026 under the SECURE 2.0 Act — to hold and spend money without the funds counting as resources for SSI up to $100,000 and without affecting Medicaid regardless of balance.
The beneficiary can deposit and spend money directly. Funds can pay for anything that qualifies as a "qualified disability expense," which is a generous category — housing, transportation, education, employment support, assistive technology, health care, legal fees, and basic living expenses all qualify. The beneficiary controls the account (with or without supported decision-making) and can make purchases on their own.
Annual contribution limit: $18,000 in 2025 (indexed for inflation), with additional employed-beneficiary contributions permitted up to the federal poverty line. Total account cap in Texas: $550,000, though SSI recipients lose SSI once the balance exceeds $100,000.
What a Special Needs Trust Does
A Special Needs Trust holds assets for the beneficiary in a way that does not count as their resources, because the trust — not the beneficiary — is the legal owner. The trustee makes discretionary distributions for the beneficiary's benefit. Assets in the trust can be large; most third-party SNTs I draft hold life insurance proceeds, retirement accounts (with SECURE Act planning), inherited property, and family gifts.
SNTs are not subject to the $100,000 ABLE threshold for SSI purposes. A third-party SNT has no Medicaid payback obligation. Distributions are controlled by the trustee, not the beneficiary — which is both a protection (against exploitation, against impulse spending, against gifts that could disqualify benefits) and a limitation (the beneficiary cannot just go buy something).
The One-Chart Framework
Here is how I think about it, and how I explain it to every family:
- Use ABLE for: everyday spending, small-balance savings, things the beneficiary handles independently, housing expenses where direct-beneficiary payment is preferable, anything under the $100,000 SSI threshold.
- Use an SNT for: the primary structural home of inheritance, large gifts, life-insurance proceeds, retirement accounts, anything above the ABLE cap, and anything you want a trustee (not the beneficiary) to control.
The right plan for most families is a third-party SNT as the structural home of inherited wealth, with the trustee periodically transferring up to the annual ABLE contribution limit into the beneficiary's ABLE account for everyday spending. That gives the beneficiary meaningful independent spending power while protecting the bulk of the inheritance from the $100,000 SSI threshold and from potential exploitation.
One Warning About First-Party ABLE Funds
Money the beneficiary earns or receives in their own name — wages from a supported-employment job, a settlement, an inheritance paid directly — can often go into ABLE without disqualification. At the beneficiary's death, however, a first-party ABLE account is subject to Medicaid payback for benefits received during life, just like a first-party SNT. This is sometimes called the "Medicaid clawback," and it is a reason to keep primary wealth in a third-party SNT while using ABLE for the beneficiary's own earned or small-gift funds.
What This Looks Like for Christian
Since I always bring this home to our own family: Christian has both. His ABLE account covers his gym membership, his clothing, his share of occasional family outings, and some minor assistive technology he has picked out himself. The third-party SNT my husband and I funded — and that my husband's life insurance paid into at his death — holds the rest and is managed by a professional co-trustee alongside my daughter. Between the two, we have covered both ends of the spectrum: Christian's independent dignity in everyday choices, and the long-term structural protection of the life we want him to have.
Carla Alston leads the special needs planning practice at WG Law. Learn more or schedule a consultation.