Planning for a loved one with a disability often brings up difficult questions. How can you provide long-term financial support without putting government benefits at risk? Two of the most commonly used tools are Special Needs Trusts (SNTs) and ABLE Accounts. Each serves a different role, and understanding the differences can help you make informed decisions that protect your loved one’s future.
What Is a Special Needs Trust?
A Special Needs Trust (SNT) is a legal arrangement that holds money or property for a person with a disability. The purpose is to provide financial support without affecting eligibility for needs-based benefits like Supplemental Security Income (SSI) or Medicaid.
There are two main types of SNTs:
- First-party SNTs, funded with the beneficiary’s own money (like a lawsuit settlement)
- Third-party SNTs, funded by someone else, such as a parent or grandparent
Funds in the trust can be used for a wide range of needs, including:
- Education and tutoring
- Assistive technology
- Personal care attendants
- Recreation and transportation
- Medical and dental expenses not covered by insurance
The trust is managed by a trustee, who is responsible for distributing funds in a way that benefits the person with special needs without violating government rules.
What Is an ABLE Account?
An ABLE Account (Achieving a Better Life Experience) is a tax-advantaged savings account available to individuals with disabilities that began before age 26. These accounts were established under federal law and are intended to help cover disability-related expenses.
Here’s how ABLE Accounts work:
- Anyone can contribute, but total annual contributions are limited to $19,000 (as of 2025).
- The account grows tax-free, and withdrawals are also tax-free if used for qualified expenses.
- The account can be used for everyday expenses, such as rent, education, transportation, and healthcare.
- The beneficiary can manage the account directly or with help from a guardian or family member.
ABLE Accounts provide greater autonomy, allowing individuals with disabilities to have more control over their own finances.
Key Differences Between SNTs and ABLE Accounts
Both tools protect eligibility for public benefits, but they work in different ways. Here’s a quick comparison:
- Contribution Limits
- ABLE: $19,000 per year
- SNT: No specific limit, but large gifts may trigger gift tax rules
- Who Controls the Funds
- ABLE: Beneficiary or authorized person
- SNT: Trustee
- Impact on SSI and Medicaid
- ABLE: Balances over $100,000 may affect SSI
- SNT: Fully protected
- Tax Benefits
- ABLE: Tax-free growth and withdrawals for qualified expenses
- SNT: Trust earnings may be taxed depending on how the trust is structured
- Spending Restrictions
- ABLE: Must be used for “qualified disability expenses,” such as housing, education, health care, and transportation
- SNT: More flexibility—can cover a wider range of supplemental needs not provided by public benefits
- Medicaid Payback
- ABLE: Upon the death of the beneficiary, states may claim remaining funds to repay Medicaid benefits
- SNT: First-party SNTs are subject to Medicaid payback, while Third-party SNTs are not subject to payback
While an ABLE Account is easy to set up and manage, a Special Needs Trust offers broader protection and more flexibility for large gifts or inheritances.
When to Use One Over the Other
An ABLE Account is ideal for everyday spending. If your loved one receives SSI and wants to pay for things like rent, groceries, or transportation, an ABLE Account makes it easy and keeps them in control.
On the other hand, a Special Needs Trust is the better choice for managing larger amounts of money or when family members want to leave an inheritance without risking benefit eligibility. A trust provides more structure and can serve as a long-term financial safety net.
For example, if your child receives a personal injury settlement, that money should go into a first-party Special Needs Trust. If you’re leaving money in your will, a third-party trust is likely a better fit.
Can You Use Both Together?
Absolutely. In fact, using both can provide a balanced and flexible plan. A trustee can transfer funds from the Special Needs Trust into the ABLE Account to give the beneficiary more day-to-day access without jeopardizing benefits. This combination allows you to enjoy the tax advantages of the ABLE Account while still benefiting from the protection and long-term oversight of the trust.
Contact an Experienced Pittsburgh Special Needs Planning Attorney
At Jones, Gregg, Creehan & Gerace, we understand how important it is to plan thoughtfully for your family’s future. We work with parents, guardians, and caregivers across Pennsylvania to build plans that protect benefits, reduce tax burdens, and provide peace of mind.
Whether you’re just getting started or updating an existing plan, we’re here to help you create a solution that fits your family’s unique needs. Reach out to us today to schedule a consultation and learn more about how we can support your planning efforts.