Families caring for a loved one with a disability often face an important estate planning question: Should we use a Special Needs Trust, an ABLE account, or both?
Both can help a person with a disability save or receive financial support while preserving access to certain means-tested government benefits. But they are not the same tool.
A Special Needs Trust is a legal trust managed by a trustee for the benefit of the person with a disability. An ABLE account is a tax-advantaged account owned by the eligible individual.
The right choice depends on factors such as where the money comes from, how much needs to be set aside, the beneficiary’s eligibility, who should control the funds, and the family’s long-term goals.
For Arizona families, understanding these differences can help prevent an inheritance or financial gift from unintentionally affecting important benefits.
What Is a Special Needs Trust?
A Special Needs Trust (SNT) is designed to hold and manage assets for a person with a disability while helping preserve eligibility for certain means-tested government benefits.
Arizona law defines a special needs trust as a trust established for the benefit of one or more people with disabilities, with a purpose that includes allowing the person to qualify or continue to qualify for public, charitable, or private benefits that might otherwise be available to them.
The trust is managed by a trustee rather than directly by the beneficiary.
Depending on the type of Special Needs Trust, the trust may be funded by the beneficiary or by someone else, such as a parent or grandparent.
Citadel Law Firm currently distinguishes between first-party and third-party Special Needs Trusts. A first-party trust generally involves the disabled person’s own assets, while a third-party trust is funded with assets belonging to someone else. We can help you with SNT as part of our estate planning process.
What Is an ABLE Account?
ABLE stands for Achieving a Better Life Experience.
An ABLE account is a tax-advantaged account designed to help eligible people with disabilities save money for qualified disability expenses.
The individual with the disability is the account owner and designated beneficiary. Under current federal rules, eligibility includes individuals whose qualifying disability began before age 46. This age threshold changed beginning January 1, 2026.
ABLE funds can generally be used for qualified disability expenses, which may include expenses related to areas such as:
- Housing
- Transportation
- Health care
- Education
- Employment
- Assistive technology
- Other qualified disability-related needs
The Social Security Administration states that up to $100,000 in an ABLE account is excluded as a resource when determining SSI eligibility.
Special Needs Trust vs. ABLE Account: What Is the Difference?
The simplest distinction is this:
A Special Needs Trust is a legal trust managed by a trustee, while an ABLE account is an individual account owned by the eligible beneficiary.
The two tools can sometimes work together rather than compete with each other.
| Consideration | Special Needs Trust | ABLE Account |
|---|---|---|
| Who owns or controls the assets? | Trustee manages the trust | Eligible beneficiary owns the account |
| Who can fund it? | Depends on the type of trust | Beneficiary, family members, and other permitted contributors |
| Contribution structure | No single annual contribution limit like an ABLE account | Annual contribution limit applies |
| SSI resource treatment | Certain properly structured SNTs can qualify for an exception | Up to $100,000 is excluded for SSI resource purposes |
| Investment options | Determined by the trust and trustee | Determined by the ABLE program |
| Access to funds | Trustee controls distributions | Beneficiary generally has account access |
| Large inheritance planning | Often useful | May be less suitable as the only vehicle |
| Day-to-day disability expenses | Can be used through trustee distributions | Designed for qualified disability expenses |
The specific rules can vary depending on the type of Special Needs Trust and the government benefit involved.
How Much Can You Put Into an ABLE Account in 2026?
The standard annual ABLE contribution limit is $20,000 for 2026.
There is also an ABLE to Work provision that may allow an eligible employed beneficiary to contribute additional amounts if the applicable requirements are met.
AZ ABLE states that the additional 2026 ABLE to Work contribution limit is $15,650, subject to the program’s requirements and the beneficiary’s compensation.
This makes ABLE accounts useful for individuals who need a relatively flexible way to save and pay for disability-related expenses.
However, the annual contribution limit can make an ABLE account less suitable as the sole vehicle for a large inheritance or substantial family wealth.
How Does a Special Needs Trust Protect Government Benefits?
Some government programs use income and resource limits when determining eligibility.
Giving a person with a disability a large amount of money outright can therefore create a benefits-planning problem.
A properly structured Special Needs Trust may allow assets to be held for the person’s benefit without automatically treating those trust assets as the beneficiary’s countable resources for SSI purposes.
The Social Security Administration specifically recognizes certain first-party and pooled trusts as exceptions to the general trust resource rules when the statutory requirements are satisfied.
This is one reason Special Needs Trust planning requires careful drafting.
A trust that is simply called a “special needs trust” is not enough. The document and funding must satisfy the applicable requirements.
How Does an ABLE Account Protect Benefits?
ABLE accounts receive special treatment under SSI rules.
The Social Security Administration currently excludes up to $100,000 of an ABLE account balance when determining the beneficiary’s SSI resources.
ABLE contributions, earnings, and distributions also receive specific treatment under federal benefit rules.
However, an ABLE account is not completely unlimited.
If the account balance exceeds $100,000 and the excess causes the beneficiary to exceed the applicable SSI resource limit, SSI payments can be suspended until the individual is otherwise eligible again.
This is one reason families should understand both the benefits and limitations of ABLE accounts.
When Is a Special Needs Trust Usually More Appropriate?
A Special Needs Trust may be worth considering when a family wants to provide substantial financial resources for a person with a disability.
For example, a trust may be appropriate when:
- A parent wants to leave a large inheritance to a child with a disability
- A grandparent wants to provide an inheritance
- A person with a disability receives a significant settlement
- The family wants a trustee to manage the assets
- The beneficiary may need long-term financial support
- The family wants more control over how funds are used
- The beneficiary receives means-tested benefits
The amount involved is only one consideration.
The beneficiary’s age, disability, benefits, family circumstances, and source of the funds can all affect the appropriate planning strategy.
When Is an ABLE Account Usually More Appropriate?
An ABLE account may be useful when an eligible person wants a more flexible way to save and pay for qualified disability expenses.
It may be particularly useful for:
- Employment-related savings
- Education expenses
- Transportation
- Housing
- Health-related expenses
- Assistive technology
- Everyday qualified disability expenses
- Personal financial independence
Unlike a Special Needs Trust, the ABLE account is owned by the beneficiary.
That can make an ABLE account more convenient for certain day-to-day financial needs.
Can You Have Both a Special Needs Trust and an ABLE Account?
Yes.
For some families, the question is not Special Needs Trust or ABLE account.
It is Special Needs Trust and ABLE account.
For example, a parent could establish a third-party Special Needs Trust to hold a significant inheritance for a child while the child also maintains an ABLE account for more direct access to funds for qualified disability expenses.
This approach can combine the broader asset-management structure of a trust with the flexibility of an ABLE account.
However, the two arrangements need to be coordinated carefully.
What Happens When Someone Inherits Money?
This is one of the most important situations for families to consider.
Suppose a parent wants to leave $250,000 to a child who receives SSI or other means-tested benefits.
Leaving the entire inheritance directly to the child could create eligibility issues depending on the program and circumstances.
A Special Needs Trust may provide a way to structure the inheritance so the assets can benefit the child without simply becoming the child’s countable personal resources.
An ABLE account could also play a role, but its contribution limits mean it may not be appropriate as the only place to put a large inheritance.
The right strategy should be determined before the inheritance is transferred.
What Happens If the Beneficiary Receives SSI?
SSI has strict resource rules.
The Social Security Administration generally considers an individual’s countable resources when determining SSI eligibility. However, certain Special Needs Trusts and ABLE account assets can receive special treatment when the applicable requirements are met.
This does not mean every trust or account is automatically excluded.
The structure matters.
For families receiving SSI, it is important to avoid transferring money or property without first understanding how the transfer could affect benefits.
What About Medicaid or AHCCCS?
SSI and Medicaid are related but separate programs, and eligibility rules can differ.
In Arizona, families may also need to consider AHCCCS, Arizona’s Medicaid program.
A Special Needs Trust can be an important part of long-term benefits planning, but families should not assume that the treatment of a trust under SSI automatically determines its treatment under Medicaid or AHCCCS.
The Social Security Administration specifically cautions that some trusts and trust payments that are not counted for SSI purposes can still affect Medicaid eligibility.
For that reason, benefits planning should consider the specific program the beneficiary receives.
First-Party vs. Third-Party Special Needs Trusts
The source of the money is one of the biggest differences between Special Needs Trusts.
First-Party Special Needs Trust
A first-party Special Needs Trust is generally funded with assets belonging to the person with the disability.
Examples could include:
- Personal savings
- An inheritance received directly by the beneficiary
- A personal injury settlement
- Other assets belonging to the individual
Federal rules impose specific requirements for a first-party Special Needs Trust. For certain trusts established for an individual under age 65, the trust must meet statutory requirements, including provisions concerning Medicaid reimbursement after the beneficiary’s death.
Third-Party Special Needs Trust
A third-party Special Needs Trust is funded with assets belonging to someone other than the beneficiary.
Parents and grandparents commonly use this type of trust to provide for a loved one with a disability.
Because the beneficiary did not contribute their own assets to the trust, the rules are different from those governing a first-party trust.
Which Is Better: A Special Needs Trust or an ABLE Account?
Neither is automatically better.
The better question is:
Which tool or combination of tools fits the beneficiary’s needs, assets, benefits, and long-term goals?
An ABLE account may be attractive because it provides the beneficiary with direct ownership and relatively flexible access to qualified disability expenses.
A Special Needs Trust may be more appropriate when the family needs to manage a larger amount of money, provide long-term support, or have a trustee control distributions.
For some families, using both provides the most flexibility.
What Should Families Consider Before Choosing?
Before establishing either option, consider:
The Source of the Money
Is the money coming from:
- The beneficiary
- A parent
- A grandparent
- An inheritance
- A personal injury settlement
- Employment income
- Another family member?
The source can affect which planning options are available.
The Amount of Money
A relatively small amount may be easier to manage through an ABLE account.
A substantial inheritance may require a broader trust strategy.
Who Should Control the Money?
With an ABLE account, the beneficiary owns the account.
With a Special Needs Trust, the trustee manages the trust assets.
This difference can be significant when the beneficiary has difficulty managing financial decisions independently.
Which Benefits Does the Person Receive?
SSI, Medicaid/AHCCCS, and other benefits can have different rules.
The estate plan should account for the specific benefits involved rather than assuming all programs treat assets the same way.
Long-Term Family Goals
Families should also consider what happens after the beneficiary’s parents or caregivers are no longer available.
A well-designed Special Needs Trust can provide a framework for long-term financial management and successor trustees.
Common Mistakes Families Should Avoid
Leaving a Large Inheritance Directly to a Beneficiary
An outright inheritance can have unintended consequences for a person receiving means-tested benefits.
Families should consider the benefits implications before naming a beneficiary directly.
Assuming Every Trust Protects Benefits
A regular revocable or irrevocable trust is not automatically a Special Needs Trust.
The trust must be properly structured for its intended purpose.
Treating an ABLE Account Like an Unlimited Savings Account
ABLE accounts have contribution and benefits-related rules.
Families should understand the annual contribution limit and the $100,000 SSI resource exclusion before accumulating significant funds.
Forgetting to Coordinate Beneficiary Designations
Life insurance, retirement accounts, and other financial assets may pass according to beneficiary designations.
Those designations should be coordinated with the overall Special Needs Trust strategy.
Waiting Until After an Inheritance Is Received
Planning after a person receives a large inheritance can be more complicated than planning before the transfer occurs.
Families should consider special needs planning before naming beneficiaries or transferring substantial assets.
Frequently Asked Questions
Is a Special Needs Trust better than an ABLE account?
Neither is universally better. A Special Needs Trust can provide more control over larger assets, while an ABLE account can provide the beneficiary with more direct access to funds for qualified disability expenses. Some families use both.
Can an ABLE account replace a Special Needs Trust?
Sometimes an ABLE account may meet some of a person’s financial needs, but it may not replace the broader planning capabilities of a Special Needs Trust, particularly when a family wants to leave a substantial inheritance.
How much can you contribute to an ABLE account in 2026?
The standard annual contribution limit is $20,000 for 2026. Eligible working beneficiaries may qualify for additional ABLE to Work contributions subject to applicable rules.
How much can an ABLE account have without affecting SSI?
Up to $100,000 of an ABLE account balance is excluded from the beneficiary’s resources for SSI purposes. Amounts above that can affect SSI depending on the individual’s other resources and circumstances.
Can a parent set up a Special Needs Trust for a child?
Yes. A parent can generally establish a third-party Special Needs Trust for a child with a disability. The trust should be drafted and funded according to the applicable legal requirements.
Can someone with a Special Needs Trust have an ABLE account too?
Yes. The two tools can be used together when appropriate. The trust can provide long-term asset management while the ABLE account can provide additional flexibility for qualified disability expenses.
Protect Your Loved One’s Financial Future
Choosing between a Special Needs Trust and an ABLE account is not simply a question of which option offers more benefits.
The right strategy depends on the person’s disability, government benefits, financial resources, family circumstances, and long-term needs.
For Arizona families, a properly structured Special Needs Trust can help provide financial support while protecting access to certain means-tested benefits. An ABLE account may provide another way to save and pay for qualified disability expenses.
Citadel Law Firm can help families evaluate their options and determine how Special Needs Trust planning may fit into a broader estate plan.
Learn more about Special Needs Trust planning in Arizona or review Citadel Law Firm’s trust services to understand how trusts can be incorporated into an estate plan.
If your family is planning an inheritance or financial support for a loved one with a disability, consider getting legal advice before transferring substantial assets.
Meet Attorney David Gerszewski
Attorney David Gerszewski is specialized in Estate Planning, Trust & Probate Law and the founder of Citadel Law Firm PLLC. He is known for making legal matters easy to understand. His background in finance and tax law makes the estate planning strategies he designs for his clients just right. He was elected a Rising Star by Superlawyers.com 4 years in a row (2023-2026).
WE WOULD LOVE TO HEAR FROM YOU!
CALL US AT (480) 565-8020
Or use the button below to schedule your free estate planning consultation.
