Special Needs Trusts and ABLE Accounts: Saving Money for Your Adult Child Without Losing Their Benefits

For most adults with significant disabilities, two government programs make their daily life possible: Supplemental Security Income (SSI) provides a small monthly cash benefit, and Medicaid pays for the medical care, day programs, and residential support that private insurance does not cover. These programs are both means-tested, which means they look at the assets in the disabled person's own name. If your adult child has more than 2,000 dollars titled in their name (the standard SSI resource limit), they lose both programs. Losing Medicaid in particular can be catastrophic, because it is what pays for the long-term services and supports that no family can afford privately.

This is the cruel trap families hit when they try to save for their adult child's future. A well-meaning grandparent leaves 50,000 dollars in a will. A life insurance policy pays out to the disabled adult as beneficiary. A car accident settlement is awarded. Any one of these can disqualify your child from SSI and Medicaid overnight. The money then has to be spent down before benefits can restart, which can wipe out years of work.

There are two main tools families use to hold money for a person with a disability while preserving SSI and Medicaid: the Special Needs Trust (SNT) and the ABLE account. These are not the same thing, and most families end up using both, for different purposes.

A Special Needs Trust is a legal arrangement where money is held by a trustee for the benefit of your adult child. The trustee (a sibling, a professional trustee, or a pooled trust organization) controls the money and pays for things that improve the disabled person's life: vacation, clothing, hobbies, a phone, a computer, a caregiver companion, dental work that Medicaid will not cover. Because the money is owned by the trust and not by your adult child, it does not count against the SSI or Medicaid resource limit. SNTs are written by an attorney and usually cost 2,000 to 5,000 dollars to set up. Pooled SNTs, run by nonprofits like CCT (the largest national pooled trust), cost less and can be opened with smaller initial deposits.

An ABLE account is a tax-advantaged savings account, similar to a 529 college savings plan, but built specifically for people with disabilities whose disability began before age 26 (the SECURE 2.0 Act raised this age to 46 starting in 2026). The disabled person can have up to 100,000 dollars in their ABLE account without it counting against SSI, and any amount up to the state cap (usually 300,000 to 500,000 dollars) without it counting against Medicaid. Anyone can contribute, with a combined annual cap (in 2026, about 18,000 dollars per year, plus an additional amount if the disabled person is working). The money grows tax-free if used for qualified disability expenses.

Most families use ABLE accounts for shorter-term, working savings (a new wheelchair, a security deposit, a community college class) and a Special Needs Trust for the larger inheritance or settlement money that needs to last for the rest of the disabled person's life.

(Sources: Social Security Administration — Spotlight on Trusts and ABLE Accounts; ABLE National Resource Center at ablenrc.org; The Arc Center for Future Planning — Financial Planning section; Special Needs Alliance at specialneedsalliance.org)