This article is the first in a three-part series on financial planning for a loved one with special needs. In this series, we’ll explore three of the most important tools available to families: ABLE Accounts, First-Party Special Needs Trusts, and Third-Party Special Needs Trusts.
For families planning for a loved one with special needs, one of the biggest financial challenges they face is balancing financial security with the need to preserve important government benefits such as Supplemental Security Income (SSI) and Medicaid.
Parents, grandparents, and other family members often want to save money, leave an inheritance, or provide ongoing financial support. At the same time, they may worry that accumulated assets could unintentionally affect the benefits their loved one depends on.
One tool specifically designed to address this challenge is the ABLE account.
An Achieving a Better Life Experience (ABLE) account is a tax-advantaged savings account that allows eligible individuals with disabilities to save and invest for future expenses while maintaining eligibility for many government benefit programs. By combining tax advantages, flexibility, and public benefit protection, ABLE accounts have become one of the most valuable financial planning tools available to families with a loved one who has special needs.
What Is an ABLE Account?
An ABLE account is similar to a 529 college savings plan but is specifically designed for individuals with disabilities.
Contributions grow tax-deferred, and withdrawals are tax-free when used for qualified disability expenses. These expenses can include housing, transportation, education, healthcare, assistive technology, employment support, legal fees, financial management, and many other costs that improve quality of life.
For example, an ABLE account could help a family save for a loved one’s future housing expenses, transportation needs, assistive technology, or other disability-related costs without jeopardizing important benefits. For many families, it provides a practical way to save for both current and future needs while maintaining financial flexibility.
Family members, friends, and the beneficiary can all contribute, making ABLE accounts a flexible way to save for both current and future needs.
Who Is Eligible and How Much Can Be Contributed?
Beginning in 2026, individuals whose disability began before age 46 may qualify for an ABLE account. Previously, the disability generally had to begin before age 26. This expansion significantly increases the number of individuals who may benefit from these accounts.
For 2026, total annual contributions from all sources are generally limited to $20,000 per year. Parents, grandparents, friends, and the beneficiary can all contribute toward this limit. In certain situations, beneficiaries who are employed may be able to contribute additional amounts beyond the standard annual limit.
Why ABLE Accounts Matter
- Preserve SSI and Medicaid Benefits
For many families, protecting SSI and Medicaid eligibility is a top priority.
ABLE accounts can help individuals with disabilities save while preserving important benefits. It’s important to remember that the first $100,000 in an ABLE account is generally ignored for SSI purposes. Balances above that amount may affect SSI cash benefits, though Medicaid eligibility is generally preserved.
- Tax-Free Growth
Like other tax-advantaged accounts, investments within an ABLE account can grow without current taxation.
As long as funds are used for qualified disability expenses, withdrawals are generally tax-free.
- Encourage Independence
Unlike many planning tools, the beneficiary generally owns the ABLE account. This can provide greater flexibility for managing everyday expenses while supporting financial independence.
Potential Medicaid Payback
Families should also be aware that, unlike a third-party special needs trust, an ABLE account may be subject to Medicaid payback upon the beneficiary’s death. After certain allowable expenses are paid, a state may seek reimbursement from any remaining ABLE account balance for Medicaid benefits provided during the beneficiary’s lifetime. As a result, ABLE accounts are often used in conjunction with, rather than as a replacement for, a properly structured special needs trust.
The Bottom Line
For families planning for a loved one with a disability, ABLE accounts can provide a powerful combination of flexibility, tax advantages, and public benefit protection.
They can help preserve SSI and Medicaid eligibility, provide tax-free growth, and create greater financial independence. While they may not be the right solution for every situation, they are often one of the most effective and underutilized tools available.
The goal is not simply to accumulate assets. It is to create opportunities, improve quality of life, and help provide long-term financial security for the people who matter most.
Helpful ABLE Account Resources
New Jersey ABLE Account Website
Pennsylvania ABLE Account Website
Coming Next in This Series
Part 2: First-Party Special Needs Trusts
When an individual with a disability receives an inheritance, settlement, or assets in their own name, a First-Party Special Needs Trust can help preserve benefits while protecting those funds.
Part 3: Third-Party Special Needs Trusts
One of the most important estate planning tools for parents and grandparents who want to leave assets to a loved one with special needs without jeopardizing SSI or Medicaid eligibility.
