What is an ABLE account and how does it work with a special needs trust?

An ABLE account is a tax-advantaged savings account for people who became disabled before a qualifying age (raised under recent law) whose benefits are described at irs.gov. Money grows tax-free and can be spent on qualified disability expenses. Crucially, ABLE balances up to a set limit are not counted against SSI and Medicaid asset tests, so the beneficiary can hold savings in their own name.

ABLE accounts and special needs trusts work well together: the ABLE account gives the person direct, everyday control over modest funds (housing, transportation, education), while a special needs trust holds larger sums managed by a trustee. Annual contributions are capped, roughly tied to the gift tax annual exclusion. Compare your state's ABLE program, since fees and features vary.