ABLE accounts and special needs trusts — protecting your child's financial future

Here's a cruel irony in the disability system: if your adult child has more than $2,000 in assets, they can lose eligibility for critical benefits like Medicaid and SSI. That means a well-meaning grandparent leaving $5,000 in a will could inadvertently disqualify your child from the healthcare and income they depend on. Financial planning for disability requires special tools.

An ABLE account (Achieving a Better Life Experience) is like a tax-advantaged savings account for people with disabilities that onset before age 26. You can contribute up to $18,000 per year (2024 limits), and the money doesn't count against the $2,000 asset limit — as long as the balance stays under $100,000. Funds can be used for disability-related expenses: housing, education, transportation, therapy, assistive technology, and more. It's one of the most underused tools in disability financial planning.

A special needs trust (also called a supplemental needs trust) is a legal arrangement where a trustee manages funds on your child's behalf. The money in the trust doesn't count as your child's assets, so it won't disqualify them from benefits. These are essential for larger amounts — inheritance, life insurance payouts, or lawsuit settlements.

Two types to know: A first-party trust holds the individual's own money (like an inheritance left directly to them). A third-party trust holds money from parents, family, or friends. Third-party trusts are more flexible and don't require Medicaid payback. Talk to a special needs attorney and financial planner who specialize in disability — generic financial advice can inadvertently cause harm.