ABLE Account and Special Needs Trusts: How Both Can Help You in North Carolina?

By ANDREW J. COBIN | March 20, 2025

Planning for the care of a loved one with disabilities is no small task. There are many choices to make, and knowing the financial tools that will protect their benefits while allowing for their financial freedom can feel overwhelming.

Two popular options for protecting assets while maintaining eligibility for essential government benefits are ABLE accounts and Special Needs Trusts (SNTs).

Both options have distinct advantages, and understanding those advantages can help you make informed decisions for your family.

At The Trusts and Estates Law Group, we understand the impact of these decisions. Our firm has been helping families across North Carolina with estate planning, elder law, and estate administration for years.

What is an ABLE Account?

An ABLE account—short for Achieving a Better Life Experience—is a tax-advantaged savings account, similar to a 529 account, designed for individuals with disabilities.

It allows people to save and invest money without jeopardizing eligibility for benefits like Medicaid and Supplemental Security Income (SSI).

Here are some main points about ABLE Accounts:

  • Age Requirement: The disability must have begun before age 26 (this will change to before age 46 starting in 2026).
  • Contribution Limits: As of January 1, 2025, you can contribute up to $19,000 annually.
  • Savings Cap: Balances over $100,000 will jeopardize SSI benefits.
  • Qualified Expenses: Funds can be used for education, housing, transportation, health care, and other disability-related expenses.
  • Ease of Setup: Generally simple to establish, with the added benefit of tax-free growth when used for qualifying expenses.

What is a Special Needs Trust?

A Special Needs Trust (SNT) is a legal arrangement that holds assets for a person with disabilities while preserving their eligibility for government assistance programs.

These trusts ensure that the beneficiary can receive supplemental funds without affecting Medicaid or SSI benefits.

There are two types of Special Needs Trusts:

  • Third-Party SNT: Established and funded by someone other than the beneficiary, like a parent or grandparent. These do not require Medicaid payback upon the beneficiary’s death.
  • Self-Settled SNT: Established and funded with the beneficiary’s assets, such as from a lawsuit settlement, or inheritance. It is important to note that Medicaid must be reimbursed upon the beneficiary’s passing for any monies paid out on the beneficiary’s behalf with this type of trust.

A trustee manages the trust and makes distributions for the beneficiary’s supplemental needs, which can include transportation, personal care services, and entertainment and recreation, but not shelter if the beneficiary receives SSI.

ABLE Account vs. Special Needs Trust in North Carolina: A Head-to-Head Comparison

Choosing between an ABLE account and a Special Needs Trust depends on several factors. Below is a detailed comparison to help guide your decision:

Category ABLE Account Special Needs Trust (SNT)
Eligibility (Age of Onset of Disability) Must have started before age 26 (before age 46 in 2026) No age requirement
Contribution Limits $19,000 annually (2025); SSI limit at $100,000 No annual contribution limit
Usage of Funds Qualified disability expenses like housing, education, and healthcare Supplemental needs like personal care, transportation, and non-essential items
Medicaid Payback Required upon the beneficiary’s death Required for Self-Settled SNTs; not required for Third-Party SNTs
Cost & Complexity Low cost; simple to open and manage More expensive; requires legal advice and ongoing trustee administration
Management Beneficiary (or guardian) controls funds Managed by a trustee
Flexibility High for everyday expenses Better for long-term and complex planning
Advantages Tax benefits; simple setup; direct spending access No contribution limits; a broader range of expenditures; strong asset protection
Disadvantages Limited contributions; Medicaid payback applies Higher setup and management costs; less direct control for the beneficiary

 

Combining the ABLE Account and a Special Needs Trust

You don’t have to choose between the two. In fact, many families use both to cover different financial needs:

  • ABLE Account for Everyday Expenses: Quick access to funds for regular costs like education, transportation, or therapy sessions.
  • Special Needs Trust for Long-Term Protection: Secure significant assets like inheritances or legal settlements while preserving benefits.
  • Working Together: An SNT can even fund an ABLE account, giving your loved one immediate access to cash for daily needs while protecting larger sums for the future.

This combined strategy can maximize benefits and provide flexibility while safeguarding long-term financial well-being.

Protect Your Loved One’s Future in North Carolina: Contact The Trusts and Estates Law Group

Choosing between an ABLE account and a Special Needs Trust is a crucial step toward securing your loved one’s future.

At The Trusts and Estates Law Group, we are committed to helping families across North Carolina make informed decisions that best fit their circumstances.

If you’re ready to explore your options, we encourage you to contact us to schedule a consultation. We’ll walk you through the process, answer your questions, and work with you to create a plan that meets your needs.

Call us today at 919-782-3500 to schedule your appointment. Together, we can help protect what matters most.

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