Why You Need BOTH ABLE Accounts and Special Needs Trusts in Your Disability Plan

Maximizing Benefits and Financial Security for Your Loved One with Disabilities

Families like mine are often overwhelmed. We know we need help, yet it doesn’t feel like we have much time to get it. So we search the internet for solutions. This can be dangerous, because it may lead us to getting incomplete, or even wrong, information. One of the more popular things I’ve been seeing is articles and webinars about “ABLE accounts vs. Special Needs Trusts”.

When I see a title like this I start thinking it must be one or the other. Y’all know I have a flair for the melodramatic, so I’m going to say this is like asking if you should have food or water. The fact of the matter is both the ABLE account and the Special Needs Trust have unique benefits and play crucial roles in your disability plan. Our government (United States) has decided these are the ONLY tools individuals with disabilities can use to save money and continue to live independently. Let’s break down the differences and explain why you should consider using both.

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ABLE Accounts

Right now (June 2024) ABLE accounts are for individuals whose disability started before age 26. You can receive a diagnosis later in life and qualify, as long as you prove the disabling condition occurred before you turned 26. This is set to change in January of next year (2025). The new year will see the age increase from 26 to 46. According to the ABLE National Resource Center, this will expand eligibility by approximately 6 million people.

The first step is putting money in. In 2024 you can contribute up to a total of $18,000. It’s important to note that the $18,000 is an aggregate number, meaning it’s the maximum allowed to be put into the account regardless of how many people contribute. You could have 1,000 people putting $18 in, or you could put it all in by yourself. You can put in even more money if you’re working, although this is set to go away at the end of 2025.

In some cases, you may want Social Security (SSI, SSDI) payments sent directly to the ABLE account. This could make a lot of sense if you find yourself trying to spend down the account each month to stay within your state’s asset limits. I see this a lot when parents are still alive and supporting their children. If you’re serving as a Rep Payee you could still have a say by being listed as an Authorized Legal Representative. Just remember the account owner is the individual with the disability (unless they have a legal Guardian / Conservator).

Using an ABLE account is pretty easy. I think most if not all, states with ABLE accounts offer either a debit card or True Link card connected to the account. You just swipe (or tap) and go. I recommend keeping receipts because there may come a time when you have to show you spent the money on a “qualified disability expense”. My son’s ABLE account (Virginia’s ABLEnow) gives me the option to link the receipt to the distribution, so that’s what I do.

Qualified disability expenses aren’t clearly defined. Generally, they include things like education, housing, transportation, and healthcare. I’ve dug deep into Social Security’s and the IRS’ instructions and what comes up over and over again is the phrase “includes but is not limited to”. So I wouldn’t worry too much about what you pay for from the ABLE account, as long as it’s for the benefit of the individual with the disability.

I mentioned the annual contribution limit earlier. ABLE accounts also have two thresholds on the total amount of money you can put into them over your lifetime. If you’re receiving SSI, then the maximum you can put into your account is $100,000. If your account goes over this amount then your SSI will be suspended until it drops back down. This shouldn’t have any impact on your Medicaid. If you’re not receiving SSI, then the maximum you’ll be able to put into your account will be equal to the state’s 529 contribution limit.

When the ABLE account owner dies the state(s) they received services from has the right to claim any remaining funds if (and only if) they were on Medicaid and the state(s) paid for their care. You’ll often hear this referred to as a “Medicaid clawback”. The state(s) can only reclaim funds for services provided after the ABLE account was opened. This is an important thing to note because there are parents of much older children who didn’t have ABLE accounts as an option until recently and whose children may have been receiving Medicaid support for decades. States have the option to do the clawback, it’s not mandatory.

There’s a lot more I could say about ABLE accounts, but I’m stopping here because I think this gives you a basic understanding. There is a LOT of content you can find if you want to nerd out. I would encourage you to start by going to the ABLE National Resource Center. They’re usually my first stop when I have a question.

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Special Needs Trusts