Special Needs Trusts and Able Accounts
Special Needs Trusts
What Is a Special Needs Trust?
A special needs trust is a legal tool used to support a person with a disability without affecting their eligibility for government benefits like Medicaid or SSI. These benefits are means-tested, meaning income or asset limits apply. If a person exceeds those limits, their benefits can be reduced or stopped.
A properly drafted special needs trust holds assets outside of the beneficiary’s name, so the trust assets do not count against government program limits.
Types of Special Needs Trusts
Testamentary Special Needs Trust
Created through a will or revocable living trust.
Comes into effect only after the death of the person who created it.
Example: A parent sets up a trust in their will for their child with a disability.
Stand-Alone Special Needs Trust
Created as a separate trust document.
Takes effect immediately, not tied to someone’s death.
Can receive funds from multiple people, not just one.
Why Chose a Special Needs Trust
Accepts Gifts from Multiple People – It can receive contributions from parents, grandparents, friends, and even the beneficiary’s own funds.
Immediate Use for the Beneficiary – No need to wait for someone’s passing or the probate process.
Easily Named as a Beneficiary – Can be listed on life insurance or retirement accounts — not possible with testamentary trusts.
Better Protection from Creditors – Since it’s not part of someone’s estate, creditors of the trust creator usually can’t touch the assets.
When Is a Testamentary Special Needs Trust Better?
The beneficiary has no income or assets and immediate funding isn’t needed.
Only one person (like a parent) intends to leave assets to the trust.
ABLE Accounts
ABLE accounts, created by the Achieving a Better Life Experience (ABLE) Act of 2014, are tax-advantaged savings accounts for individuals with disabilities. These accounts can be a powerful tool for preserving public benefits while saving for future needs. This brochure explains ABLE account eligibility, benefits, and recent updates from the IRS.
Who Is Eligible?
To open an ABLE account, the individual must have developed a significant disability before age 26. The individual must be a U.S. citizen or legal resident and be:
- Receiving SSI or SSDI, or
- Able to provide a disability certification meeting the Social Security Administration's criteria.
Each eligible individual can only have one ABLE account.
Who Can Contribute and How Much?
Anyone can contribute—family, friends, or the individual. In 2025, the annual contribution limit is $19,000. Additionally, the designated beneficiary may contribute more if they are employed and not participating in an employer-sponsored plan. Lifetime contribution limits are $555,000 in 2025 for Kentucky.
Why Open an ABLE Account?
ABLE accounts allow individuals with disabilities to:
- Save without impacting Medicaid, SNAP, FAFSA, or HUD benefits.
- Exclude up to $100,000 from SSI eligibility calculations.
- Grow savings tax-free if used for qualified expenses.
What Can Funds Be Used For?
Funds must be used for 'qualified disability expenses,' which include:
- Health care
- Housing and food
- Transportation
- Education and training
- Assistive technology
- Legal fees
- Basic living expenses
The IRS defines these expenses as those related to maintaining or improving the health, independence, or quality of life of the beneficiary.
Who Administers ABLE Accounts?
ABLE accounts are state-run. Kentucky participates through the STABLE Kentucky program, which is part of the national STABLE Account network. You do not have to be a resident of Kentucky to use their program.
➡ Visit the KY STABLE program website: https://www.stablekentucky.com
