Families caring for an adult with special needs often face a difficult challenge: how to save money for their care without jeopardizing essential benefits like SSI (Supplemental Security Income) and Medi-Cal.
Two of the most common tools available today are the ABLE Accounts and the Special Needs Trust (SNT). Each has its own advantages and limitations, and in many cases, families benefit from using both together.
The Origin of ABLE Accounts
For decades, individuals with disabilities were restricted by strict asset limits. If they saved more than $2,000, they risked losing access to SSI or Medi-Cal benefits. This meant families could not build emergency funds or plan long-term without fear of disrupting support.
In response, advocates pushed for reform. Their efforts led to the Achieving a Better Life Experience (ABLE) Act, passed by Congress in 2014. Modeled after 529 college savings plans, ABLE accounts created the first opportunity for people with disabilities to save money in a tax-advantaged account without losing benefits.
California launched its own program, CalABLE, in 2018, giving families across the state access to this powerful planning tool.
What Is an ABLE Account?
An ABLE account is a tax-free savings account for individuals with disabilities. Money deposited into the account does not count toward SSI and Medi-Cal limits, making it easier for families to save.
Key Benefits of an ABLE Account:
- Easy and affordable to set up online.
- Beneficiary can manage the account directly (if capable).
- Up to $100,000 is exempt from SSI resource limits.
- Earnings grow tax-free when used for disability-related expenses.
- Can be used for everyday costs: housing, healthcare, education, transportation, and assistive technology.
Limitations:
- Annual contribution limit of $18,000 (2024).
- Disability must have begun before age 26 (rising to 46 in 2026).
- Remaining funds may be subject to Medi-Cal recovery upon the beneficiary’s passing.
- Investments limited to cash and financial assets — no real estate.
What Is a Special Needs Trust (SNT)?
A Special Needs Trust is a legal arrangement that holds money or property for a disabled person while preserving benefit eligibility.
There are two main types:
- First-Party SNT – funded with the beneficiary’s own money (e.g., lawsuit settlement, inheritance). Medi-Cal recovery applies after death.
- Third-Party SNT – funded by parents, relatives, or others. No Medi-Cal payback is required, and remaining assets can pass to other heirs.
Key Benefits of an SNT:
- No cap on contributions or account size.
- Can hold real estate, investments, inheritances, and life insurance.
- Ensures SSI and Medi-Cal eligibility regardless of trust size.
- Provides professional oversight by a trustee.
- Third-party trusts allow wealth to pass to family after the beneficiary’s death.
Limitations:
- More complex and costly to establish (requires legal drafting).
- Ongoing administration and trustee fees.
- Beneficiary does not directly control the funds.
- Housing-related distributions can reduce SSI benefits.
Side-by-Side Comparison
| Feature | ABLE Account | Special Needs Trust (SNT) |
|---|---|---|
| Setup Cost | Low, simple | Higher, requires attorney |
| Contribution Limit | $18,000/year | Unlimited |
| Control | Beneficiary (if able) | Trustee |
| SSI Impact | Exempt up to $100,000 | Fully exempt |
| Medi-Cal Payback | Always | First-Party only |
| Tax Benefits | Tax-free growth & withdrawals | May be taxable |
| Best For | Daily expenses & modest savings | Large inheritances & long-term planning |
Which Option Is Best?
An ABLE account is best for everyday expenses and modest savings.
A Special Needs Trust is best for inheritances, life insurance proceeds, and larger sums of money.
Together, they provide the strongest plan:
- The trust holds larger assets and protects them long-term.
- The ABLE account provides the beneficiary with independence and flexible spending power.
Final Thoughts
At CA Wills and Trusts, we know every family’s needs are different. Some clients benefit from a simple ABLE account California offers through CalABLE, while others require a comprehensive Special Needs Trust. In many cases, the right solution is a combination of both.
If you are planning for a loved one with special needs, we can help you choose the best path forward to protect their benefits and provide lifelong security.
📍 CA Wills and Trusts
2070 Business Center Dr., Suite 140
Irvine, CA 92612
📞 833-500-2009
📧 [email protected]
📥 For your free downloadable PDF handout, click here: ABLE vs. Special Needs Trust Handout