Special Needs Trusts vs ABLE Accounts: What's the Difference?
Preserving settlement funds for individuals with disabilities protects their quality of life. Two standard solutions are special needs trusts and ABLE accounts. When making a selection, several factors are to be considered, including age, needs-based benefits status, funding amount, and other assets. Keep reading to learn more.
Special Needs Trusts
To qualify for a special needs trust (SNT), the individual must meet Social Security Administration (SSA) disability standards. By placing settlement proceeds in an SNT, the beneficiary can protect eligibility for needs-based government benefits. Trust distributions can then be used to pay for goods and services not covered by government benefits.
Two types of self-funded SNTs exist: a first-party SNT and a pooled trust. Both require the individual to meet the SSA’s disability standards, and neither trust type has a funding limit. Upon the beneficiary’s death, Medicaid will seek recovery of any expenses for which it has paid.
Differences between the two trust types include age requirements, how the assets are held, and the typical fees. Click here for a deeper comparison of first-party SNTs and pooled trusts.
ABLE Accounts
An ABLE account is funded with the beneficiary’s assets and can be used for disability-related goods and services. ABLE account eligibility is only available to individuals who became disabled before age 26. However, the age threshold will be raised to 46 as of January 1, 2026. In addition to meeting the age requirement, the applicant must meet the Social Security Administration’s disability criteria.
Unlike SNTs and pooled trusts, ABLE accounts have an annual contribution limit of $18,000 for 2024. Lifetime contribution limits vary by state. Funds held in an ABLE account are protected from asset testing up to $100,000. SSI benefits will be suspended if funds exceed $100,000 or if a combination of ABLE account funds and other countable resources exceeds that amount. The amount in the ABLE account does not impact Medicaid eligibility, but depending on the state, there may be a Medicaid payback provision.
Contact Sage for Special Needs Trusts and ABLE Accounts
Sage’s experienced settlement consultants work closely with injured claimants and their families to create long-term financial security. Contact your Sage consultant today for more information about first-party special needs trusts, pooled trusts, and ABLE accounts.