When planning for the financial future of a loved one with a disability, understanding your options is critical. Two of the most common tools are Special Needs Trusts (SNTs) and ABLE (Achieving a Better Life Experience) accounts. While both are designed to protect eligibility for government benefits such as Medicaid and SSI, they differ significantly in structure, funding, control, and flexibility.
A Special Needs Trust allows for larger contributions and more comprehensive management of funds but often involves legal setup and trustee oversight. In contrast, ABLE accounts offer tax-advantaged savings with greater simplicity and autonomy for the beneficiary, though with contribution and balance limits. Knowing the key distinctions between these two financial tools is essential for effective special needs planning.
Read More: Advantages for Individuals with Disabilities and Their Families
Special Needs Trust vs. ABLE Account: A Comprehensive Overview
ABLE accounts and Special Needs Trusts (SNTs), also known as supplemental needs trusts, are valuable financial tools that help individuals with disabilities accumulate resources without risking eligibility for essential government benefits such as Supplemental Security Income (SSI) and Medicaid.
While both serve the common goal of supporting long-term financial stability for individuals with disabilities, they differ in important ways, including contribution limits, permissible expenditures, and account management. Understanding these distinctions is crucial when choosing the most suitable option.
This article provides a detailed comparison of ABLE accounts and SNTs, outlining their features, benefits, and limitations to help you make a well-informed decision tailored to your financial and care-planning needs.
Key Takeaways
- Preserve Benefit Eligibility: Both ABLE accounts and Special Needs Trusts (SNTs) allow individuals with disabilities—or their families—to save and manage funds without affecting eligibility for critical government programs such as Supplemental Security Income (SSI) and Medicaid.
- Ease of Use vs. Flexibility: ABLE accounts are relatively simple to open and manage but have annual contribution and balance limits.
- Higher Capacity, Greater Complexity: SNTs offer more flexibility and no contribution limits but often require legal assistance to set up and manage, making them more complex and costly.
- Complementary Tools: It’s not an either/or decision—you can use both. ABLE accounts are ideal for daily expenses, while SNTs are better suited for long-term or larger expenditures.
Supplemental Needs Trusts (SNTs)
A Supplemental Needs Trust (SNT) is a legal tool designed to provide financial support to an individual with a disability without jeopardizing their eligibility for vital public assistance programs, such as Supplemental Security Income (SSI) and Medicaid. These programs typically impose strict income and asset limits, and exceeding those thresholds can result in loss of benefits. An SNT helps circumvent these restrictions by ensuring that funds held within the trust are not counted as personal assets of the beneficiary.
Structured as a fiduciary arrangement, an SNT appoints a trustee—either an individual or an institution—to manage the trust’s assets on behalf of the beneficiary. This arrangement allows the trust creator to contribute funds with confidence, knowing they will be used in accordance with the trust’s terms and solely for the benefit of the individual with a disability.
SNT funds can be used to cover a wide range of expenses not provided by government programs, including medical care, transportation, personal care services, education, and recreational activities. Additionally, the assets within an SNT are typically protected from creditors and legal judgments, offering further financial security. For families or caregivers planning long-term support, an SNT is a strategic way to ensure quality of life without compromising access to essential benefits.
Advantages of Supplemental Needs Trusts (SNTs)
- No Contribution Limits: Unlike ABLE accounts, there are no annual or lifetime caps on how much can be contributed to an SNT.
- Asset Protection: Funds held in an SNT are typically shielded from creditors and legal judgments, offering financial security.
- Benefit Preservation: Assets in the trust do not count toward income or asset limits, ensuring continued eligibility for SSI, Medicaid, and other need-based programs.
Disadvantages of Supplemental Needs Trusts (SNTs)
- Cost and Complexity: Establishing an SNT usually requires legal expertise, making it more expensive and time-consuming to set up and maintain.
- Restricted Use of Funds: Disbursements must be for supplemental needs—such as medical care, therapy, or transportation—and cannot be used for basic living expenses like rent, groceries, or utilities.
ABLE Accounts
An ABLE (Achieving a Better Life Experience) account is a tax-advantaged savings tool specifically designed for individuals with significant disabilities that began before age 26. Created under the 2014 ABLE Act, these accounts provide an accessible and flexible way to save money without jeopardizing eligibility for vital means-tested public benefits like SSI and Medicaid.
Contributions to an ABLE account can be made by the beneficiary, family, or friends. While contributions are not tax-deductible federally, the earnings within the account grow tax-free, and withdrawals for qualified disability expenses (QDEs) are also tax-free. QDEs include a wide array of expenses, from healthcare and assistive technology to housing, education, and even food—offering broader usage than a Supplemental Needs Trust (SNT).
Unlike SNTs, ABLE accounts are relatively easy and inexpensive to establish and manage. However, they do come with limitations. Annual contributions are capped at $19,000 in 2025 (subject to change), and most states impose a total balance limit, usually around $300,000. Additionally, any remaining funds in the ABLE account upon the beneficiary’s death may be subject to Medicaid payback, depending on state policy.
Advantages of ABLE Accounts
- Simple and low-cost to set up and maintain
- Tax-free growth and withdrawals for qualified disability expenses
- Can cover basic living costs like housing and food
Disadvantages of ABLE Accounts
- Annual contribution limit of $19,000 (2025)
- State-specific maximum account balances (typically up to $300,000)
- Medicaid may recoup funds after the beneficiary’s death
ABLE accounts offer an effective complement—or alternative—to SNTs, especially for individuals seeking greater independence in managing day-to-day expenses.
Key Differences Between Supplemental Needs Trusts (SNTs) and ABLE Accounts
There are several important distinctions between SNTs and ABLE accounts, particularly in terms of eligibility, contribution limits, permissible expenses, and overall management. Understanding these differences can help you make an informed decision based on your financial planning needs.
Eligibility
- ABLE Accounts: To qualify for an ABLE account, individuals must have a disability or blindness that began before the age of 26. This eligibility can be confirmed through a disability determination or proof of the condition.
- SNTs: There are no age restrictions for third-party SNTs, which are funded by anyone other than the beneficiary. However, first-party SNTs must be established before the beneficiary reaches age 65 and are funded with the beneficiary’s own assets.
Account Limits
- ABLE Accounts: These accounts have both annual contribution limits (currently $19,000 in 2025) and state-specific balance limits, usually capped at around $300,000. Contributions above this amount may impact eligibility for SSI benefits.
- SNTs: There are no contribution or balance limits for SNTs, making them more flexible in terms of the amount of money they can hold.
Permitted Expenses
- ABLE Accounts: Funds in an ABLE account can be used for a broader range of expenses, including basic living costs like housing, food, and transportation, as well as health, education, and employment-related expenses.
- SNTs: The funds in an SNT are meant for “extra” expenses that aren’t covered by public benefits, such as vacations, entertainment, pets, home furnishings, and certain therapies. SNT funds cannot cover basic living costs, as this could reduce the individual’s eligibility for public assistance.
Management and Accessibility
- ABLE Accounts: These accounts are managed directly by the individual with a disability, offering them control over how the funds are spent. The funds can be easily accessed, often through a debit card linked to the account.
- SNTs: An SNT is managed by a trustee, who oversees the funds and ensures they are used in accordance with the trust’s terms. Accessing funds can be more complex, as the trustee must approve disbursements.
Taxation and Medicaid Liability
- ABLE Accounts: Funds in an ABLE account grow tax-free, and withdrawals for qualified disability expenses (QDEs) are also tax-free. However, after the individual’s death, the state may use the remaining funds to reimburse Medicaid for services provided to the beneficiary.
- SNTs: Funds in an SNT are taxable each year. Additionally, money in a third-party SNT is generally not subject to Medicaid payback after the beneficiary’s death, offering more protection for the funds.
6. Setup and Cost
- SNTs: Establishing an SNT typically requires legal guidance, making the process more expensive and complex.
- ABLE Accounts: Setting up an ABLE account is simple and can be done directly through the state’s website, with no need for legal assistance.
SNT vs. ABLE Account: Which Is Better?
Determining whether a Special Needs Trust (SNT) or an ABLE account is the better option depends entirely on your unique circumstances. Each tool offers distinct advantages, and in many cases, the most effective approach may be to use both in tandem. Consulting with a qualified financial planner or special needs attorney is highly recommended to guide your decision-making process.
ABLE accounts are ideal for individuals with disabilities who meet the age and disability onset requirements. They’re simple to set up, offer tax-free growth, and allow funds to be used for a wide range of everyday expenses—including housing and food—without affecting eligibility for critical public benefits like Medicaid and SSI (up to $100,000 in the account).
On the other hand, an SNT is a powerful tool for managing larger sums of money or gifts from others, and for long-term financial planning. SNTs have no contribution or balance limits and can help preserve eligibility for benefits regardless of account value. They are better suited for expenses not covered by public benefits, such as therapies, travel, and recreational needs—but cannot be used for basic living expenses without potentially affecting benefits.
As Juliana Crist, senior consultant at AKF Consulting, notes, factors such as guardianship, estate planning, tax implications, Medicaid payback rules, and total asset value should all be part of your evaluation. “SNTs and ABLE accounts are complementary tools—they work very well together,” she emphasizes.
If possible, consider opening an ABLE account for daily and accessible spending, while also establishing an SNT for long-term and higher-value financial planning needs. This dual approach offers both flexibility and protection.
Frequently Asked Questions
Can a person have both an ABLE account and a Special Needs Trust (SNT)?
Yes. These tools are designed to complement one another. An ABLE account is ideal for daily expenses and offers tax advantages, while an SNT allows for larger contributions and long-term financial planning.
What is the age requirement for opening an ABLE account?
To be eligible, the individual must have developed their qualifying disability before the age of 26. (Note: This age limit is set to increase to 46 starting in 2026.)
Do ABLE accounts affect SSI or Medicaid eligibility?
Funds in an ABLE account do not count against SSI or Medicaid eligibility, provided the balance remains below $100,000 for SSI purposes and within the state’s overall cap (often $300,000+).
Can ABLE funds be used for housing and food?
Yes. ABLE accounts allow for a broader range of qualified disability expenses (QDEs), including housing, food, transportation, education, and more—unlike SNTs, which restrict spending on basic living costs.
What are the contribution limits for ABLE accounts?
In 2025, the annual contribution limit is $19,000. Contributions must fall within this limit to maintain eligibility for tax benefits and public assistance.
Are there contribution limits for SNTs?
No. SNTs have no annual or lifetime contribution limits, making them suitable for large gifts, inheritances, or settlements.
Conclusion
Choosing between a Supplemental Needs Trust (SNT) and an ABLE account ultimately depends on the specific financial needs and circumstances of the individual with a disability. Both tools are designed to protect eligibility for essential public benefits like Medicaid and SSI, but they offer distinct advantages and limitations.