Special needs trusts and ABLE accounts are useful saving tools to save much-needed funds for children with special needs. Although their requirements vary, these tools allow these individuals to shelter savings without endangering their eligibility for means-tested government assistance programs within certain limits.

ABLE Accounts

ABLE accounts permit qualified children with special needs to save a set sum of money each year, which is $19,000 in 2025. The annual savings limit for ABLE accounts varies by year and is tied to the federal annual gift tax exclusion. Historically, the ABLE account savings limit has modestly increased in most years.

Furthermore, certain employed ABLE account beneficiaries may make additional contributions each year. The additional amount is the designated beneficiary’s compensation for the tax year or, in 2025, $15,650 for residents in the continental U.S., $19,550 in Alaska, and $17,990 in Hawaii. However, these individuals may not contribute additional funds to an ABLE account if their employer contributes to certain qualified retirement accounts on their behalf.

Individuals may establish an ABLE account if they develop a qualifying disability before age 26. (Note that in 2026, the age limit will increase to 46.) To have a qualified disability, individuals must meet criteria established by the Social Security Administration concerning significant functional limitations resulting from the disabling condition.  

Individuals with special needs may manage their ABLE accounts if they can legally do so. However, individuals who cannot manage the ABLE account independently can have their parent(s), guardian(s), or power of attorney handle the account. The funds in ABLE accounts grow tax-free, just like those in 529 college savings plans. A qualified individual may have only one ABLE account.

The main benefit to ABLE accounts is that individuals with special needs may maintain them without fear of jeopardizing their eligibility for commonly used government programs such as Medicaid and Supplemental Security Income (SSI). Eligibility for these Medicaid and SSI relies, in part, on individuals having very limited sources of income and assets.

Although the funds in ABLE accounts generally do not count as assets or resources for Medicaid or SSI, a qualified individual may not hold unlimited funds in an ABLE account. These means-tested programs disregard the first $100,000 of funds in an ABLE account. However, if an ABLE account contains more than $100,000, any funds more than $100,000 will cause SSI benefits to be suspended. Therefore, ABLE accounts with balances of more than $100,000 can result in individuals becoming temporarily ineligible for SSI.

Funds in an ABLE account may come from various sources. Individuals with special needs who work may put some or all their income into ABLE accounts. Parents of children with special needs may use ABLE accounts as savings accounts for their children.

Individuals with ABLE accounts can use those funds to pay for qualified disability expenses (QDEs). QDEs include expenses related to basic living expenses, education, housing, transportation, and employment training and support. ABLE account funds can also pay for assistive technology and related services, personal support services, health costs, prevention and wellness expenses, financial management, and administrative services. Other eligible QDEs include legal fees and ABLE account oversight and monitoring expenses.

Upon the death of an individual with special needs who owns an ABLE account, any remaining funds may be required to reimburse the state for Medicaid benefits drawn by the beneficiary. However, before the ABLE account funds go to reimburse the state, they can be used to pay for outstanding QDEs for the individual, including funeral and burial expenses.

Special Needs Trusts

Special needs trusts (SNTs) are well-established tools that allow children with special needs to save funds without impacting SSI or Medicaid eligibility. Unlike ABLE accounts, a child with special needs may have one or more SNTs, which can hold unlimited funds.  Unlike ABLE accounts, they can also hold any type of asset including real estate and inherited IRAs as well as brokerage and investment accounts. No matter how much money an SNT contains, it will not disqualify the individual who is the beneficiary of the SNT from meeting the financial requirements of SSI or Medicaid.

An individual with disabilities must establish a self-settled SNT before the age of 65. For example, a child with special needs can establish a self-settled SNT to receive child support funds or a personal injury settlement directly. The only caveat is that self-settled SNTs must contain a Medicaid payback provision. Under the payback provision, any funds remaining in the SNT after the child’s death must be paid back to the state of Illinois to reimburse the Medicaid program.

On the other hand, SNTs also can be third-party trusts or those that a third party establishes to benefit a child with special needs. Third-party SNTs can be established to benefit a person of any age. In this instance, parents or other relatives typically fund the SNT through inheritance or gifts. Unlike self-settled SNTs, third-party SNTs are not required to contain a Medicaid payback provision.

Examples of permissible use of SNT funds include but are not limited to the following:

• Activities and entertainment;
• Education or training
• Insurance, subject to certain limitations
• Therapies, medical equipment, care management, or services not covered by Medicaid
• Professional services
• Transportation/travel costs, including costs related to a vehicle, its maintenance, and operation
• Household and personal items
• Taxes

Contact Us Today to Learn More About Our Legal Services

Rubin Law is the only Illinois law firm to dedicate itself exclusively to providing compassionate legal services for children and adults with special needs. We offer unique legal and future planning techniques to meet your family’s individual needs.

Call us today at 866-TO-RUBIN or email us at email@rubinlaw.com to learn more about the services we can offer you and your family.