Supporting a loved one with a disability takes careful planning. You want to protect their comfort and security while keeping essential benefits in place.
Two main tools can help achieve that balance: ABLE accounts and special needs trusts. Each allows savings and financial support without affecting government eligibility, but they work in very different ways.
How Government Benefit Rules Work
Eligibility for Supplemental Security Income (SSI) and Medicaid depends on financial need. In Connecticut, an individual can hold no more than $1,600 in countable assets and still qualify.
If someone receives a cash gift or inheritance outright, it can cause a loss of benefits. To avoid that problem, the funds must be held in a structure that does not count as personal ownership. ABLE accounts and special needs trusts meet that standard, although each functions differently.
Understanding ABLE Accounts
An ABLE account, short for Achieving a Better Life Experience, is a special savings program created by federal law. It allows a person with a qualifying disability to save money in their own name without exceeding asset limits for benefits.
Connecticut participates in the national ABLE network, so eligible residents can open accounts online with minimal paperwork. The person with the disability can use the account directly or name an authorized representative to help manage it.
Benefits of ABLE Accounts
ABLE accounts are designed for simplicity. You can contribute up to $19,000 per year, and the balance grows tax-free when used for qualified disability expenses.
Qualified expenses include housing, transportation, education, and health-related needs. The account also encourages personal independence, since the beneficiary controls how the money is spent within program rules.
Limits of ABLE Accounts
Starting in January 2026, eligibility will be limited to people whose disability began before age 46. Contributions above the annual limit are not allowed, and the account balance cannot exceed the state’s cap for 529 savings plans.
When the beneficiary dies, any remaining funds are subject to Medicaid recovery. Those limits make an ABLE account best suited for modest savings and short-term spending needs.
What a Special Needs Trust Provides
A special needs trust serves a broader and more flexible role. It is a legal document that holds and manages assets for the benefit of a person with a disability.
The trustee controls the funds and pays for services or items that public benefits do not cover. Because the beneficiary never owns the assets directly, eligibility for SSI and Medicaid remains intact.
Types of Special Needs Trusts
You can create two kinds of special needs trusts. A first-party trust uses the beneficiary’s own assets, such as a personal injury settlement or inheritance. Federal law requires that type to include a Medicaid payback provision.
A third-party trust is funded by parents, relatives, or others and does not include payback. It can hold unlimited assets and remain active for life.
Advantages of Special Needs Trusts
Special needs trusts have no age restriction and no contribution cap. They can receive gifts, life insurance proceeds, or estate transfers of any size.
The trustee manages distributions carefully to preserve benefits while meeting the beneficiary’s needs. A well-drafted trust can also protect assets from creditors and coordinate with the rest of your estate plan.
When to Use Both Tools Together
Many Connecticut families use an ABLE account and a special needs trust at the same time. An ABLE account can handle smaller, everyday expenses such as groceries or transportation.
The trust can cover larger purchases or long-term investments. Coordination between the trustee and the ABLE account holder avoids duplicate payments and keeps the plan compliant with benefit rules.
How to Choose the Right Approach
The best option depends on several factors. Age, type of disability, available resources, and family goals all influence the decision.
Some families prefer the ease of an ABLE account, while others need the flexibility and longevity of a trust. Both can be effective when structured correctly and reviewed regularly.
We Are Here to Help!
You can call us at 860-548-1000 to schedule a consultation at our Westport, CT estate planning office, and you can use the same number to set up an appointment at our Glastonbury location. If you would like to send us a message, use our contact form, and we will be in touch ASAP.
Plus, we offer monthly seminars in and around Glastonbury and Westport. They are offered on a complimentary basis, and you can visit our seminar page to see the dates and obtain registration information.
Mr. Nirenstein is licensed to practice before the courts of the State of Connecticut and the United States District Court. He is a member of the Connecticut and Hartford County Bar Associations, and the Estate and Probate, Elder Law, Business Law and Real Estate Sections of the Connecticut Bar Association.
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