When you first hold your child in your arms, you imagine a lifetime of possibilities—their first smile, their laughter, the dreams they’ll one day chase. For parents of children with special needs, those dreams are just as bright, but they often come with deeper questions.
“How can I make sure my child will always be cared for?”
“What happens when I’m no longer here to guide them?”
Planning for a child with special needs requires you to think ahead and consider how you’ll build a lifetime of security, opportunity, and dignity for the person you love most. Thankfully, there are powerful tools designed to help families do exactly that. ABLE accounts, Special Needs Trusts, and 529 plans can all play a different role in protecting your child’s future.
Understanding how they work on their own and as part of your greater financial plan can help make those tough decisions about your child’s financial future a little easier.
Are you Eligible?
Planning for a child with special needs also means learning a new vocabulary. As attorney Eric R. Prichard, Esq. of The Law Office of Eric R. Prichard explains, the Social Security Administration defines a disability as the inability to engage in “substantial gainful activity.” In other words, it’s not about whether someone has a visible condition—it’s about whether they can work enough to support themselves. And even if they do have a visible condition, that doesn’t necessarily mean they’re unable to engage in substantial gainful activity.
This distinction matters because eligibility for benefits like SSI depends not only on a person’s medical diagnosis, but also on how much income they earn and have available to them. That’s why many families find themselves balancing compassion with compliance as they plan for their child’s future.
What Are ABLE Accounts?
Ideal for daily or more immediate expenses, ABLE accounts were created under the Achieving a Better Life Experience (ABLE) Act of 2014. They offer a tax-advantaged way for individuals with disabilities to save and invest for qualified expenses.
ABLE accounts are state-offered programs, meaning rules, regulations, and eligibility vary. In Massachusetts, the Attainable® Savings Plan is the state’s official ABLE savings plan, currently managed by Fidelity Investments and MEFA.
How ABLE Accounts Work
ABLE accounts are owned by either the individual with disabilities or an authorized representative, and contributions are made with after-tax dollars (which grow tax-free). Withdrawals used for qualified disability expenses are also tax-free.
Some examples of qualified expenses include:
- Housing
- Assistive technology
- Education
- Transportation
- Healthcare costs
- Basic living needs
- Disability-related costs that promote independence or quality of life
To open an ABLE account, the beneficiary must have a disability or blindness, and the individual’s disability must have been diagnosed before age 26 (unless the disability is blindness).² However, effective January 1, 2026, the age will increase to 46.³
Most ABLE programs require a minimum amount to open an account, but often the minimum is below $50. There is no minimum to open a Massachusetts Attainable® Savings Plan.
Should the beneficiary die before the account funds are withdrawn, states can claim reimbursement from residual ABLE balances for Medicaid benefits paid after the account was established. This “payback” rule varies by state.
“While the tax-free growth can be appealing, the government’s payback requirement significantly limits the long-term benefit,” cautions Prichard. “It’s usually not something parents want to fund with their own assets.” Prichard notes that ABLE accounts are best used for smaller, day-to-day disability expenses vs as a long-term investment vehicle. “If a child or adult with disabilities has modest earnings or receives a small gift or inheritance, an ABLE account can safely and easily hold those funds without jeopardizing benefits,” he says. “But for larger gifts or inheritances, a supplemental needs trust is often the better choice.”
ABLE Contribution & Balance Limits
Annual contributions from family members or others are capped at the annual gift tax exclusion of $19,000 for 2025, but additional contributions of up to $15,650 for 2025 can be made if the beneficiary is working and not participating in a workplace retirement plan.¹
However, states often do impose a maximum balance threshold. For Massachusetts, the maximum account balance is $500,000, but if the account balance exceeds $100,000, Supplemental Security Income (SSI) is suspended.³ It resumes if the balance drops below the $100,000 threshold. Medicaid (MassHealth) benefits are unaffected by account balances.
What Is a Special Needs Trust (SNT)?
A Special Needs Trust (SNT), also called a Supplemental Needs Trust, can be an excellent option for families seeking greater control and protection of larger assets.
An SNT holds assets for a person with disabilities to be used for their benefit. Because the assets belong to the trust (not the individual), they are not counted toward Medicaid or SSI resource limits.
Assets in the trust do not belong to the beneficiary directly. Instead, the trustee has discretion to make distributions for permitted purposes, which must be supplemental to public benefits and can’t supplant them. Rather than cover expenses like basic food and shelter (which should be covered by SSI or Medicaid), SNT distributions can be used to address additional costs, including therapy, job coaching, medical equipment, or other “quality of life” improvements that aren’t covered by government programs.
According to Eric R. Prichard, Esq., special needs trusts today are far more adaptable than in years past. “Older trust documents were drafted with strict prohibitions on paying for basic needs like food, clothing, or shelter, out of concern that such distributions might reduce or eliminate government benefits,” he explains. “But that often tied the trustee’s hands if the beneficiary wasn’t receiving those benefits—or only receiving a small amount.”
Modern drafting takes a more balanced approach. “Today, we build in flexibility,” Prichard says. “If public benefits are in play, the trustee must be aware of the administrative rules. But if benefits aren’t relevant, the trustee can spend the funds as needed for the beneficiary’s well-being.”
And this can be particularly important to note for families that are trying to plan for a young child whose ability to participate in gainful activity is speculative. Consider a child diagnosed with autism or severe dyslexia, conditions that may seem insurmountable in the early years, who later grows into a fully independent, successful adult. The flexibility built into today’s special needs trusts gives trustees the ability to make thoughtful judgment calls as circumstances evolve. If the beneficiary no longer relies on disability benefits, the trustee can choose to dissolve the trust, ensuring the family’s resources continue to serve their best purpose.
Choosing the Right Trustee
With that flexibility comes a greater level of responsibility for the trustee. “Parents are usually incredibly well-versed in how these trusts operate,” says Prichard. “They live it every day—they know what expenses are allowed and how to avoid jeopardizing benefits.”
The challenge, he notes, often comes later. “Where things tend to go awry is when a second generation—like sibling, or relative—steps in. They may not have the same context or understanding of special-needs rules.”
To avoid missteps, Prichard recommends that parents formally introduce successor trustees to the drafting attorney or a professional familiar with special needs planning. This ensures the next person in line understands both the family’s intentions and the technical requirements before they ever assume the role.
Types of SNTS
SNTs fall into three main categories, each structured around who provides the funds and how those funds are used:
First-party SNTs, commonly known as d4A Trusts, are funded with the beneficiary’s own assets, such as an inheritance or legal settlement. Upon the beneficiary’s death, remaining assets typically go to reimbursing Medicaid.
Third-party SNTs, commonly known as Supplemental Trusts, are funded by parents, grandparents, or other loved ones. These are not subject to Medicaid payback. Any funds left in the trust after the beneficiary’s death can be directed to other heirs. Prichard often recommends parents consider a second-to-die life insurance policy to fund a supplemental needs trust. “It allows the parents to preserve their own retirement assets while ensuring the trust will be funded when both parents are gone,” he says. “It’s far better than disinheriting the child and relying on siblings to ‘do the right thing,’ since life events like divorce or lawsuits can derail even the best intentions.”
Pooled trusts are managed by charities or nonprofit entities that pool resources for multiple beneficiaries while maintaining individual accounting. Remaining assets typically go to reimbursing Medicaid or other individuals in the pool.
Eligibility & Limits
Unlike ABLE accounts, there is no age-of-onset requirement, nor is there a contribution limit.
However, for first-party/D4A SNTs, the trust typically needs to be created before the beneficiary turns 65. In addition, it must include Medicaid payback language, which enables states to seek reimbursement for Medicaid benefits upon the person’s death.
What Is a 529 Plan?
529 plans offer families a tax-advantaged way to save for college or private K-12 tuition. For children with special needs, these plans also play an important role, especially if higher education or vocational training is in your child’s future.
How 529 Plans Work
With a 529 plan, the account owner (often a parent) retains control over distributions. Contributions grow tax-deferred, and withdrawals used for qualifying educational expenses are tax-free. Funds withdrawn for non-education purposes may be subject to tax and a penalty.
Common eligible expenses include:
- Special education
- Associated therapy
- Tuition
- Books
- Computers
Some 529 plans allow rollovers from the 529 to an ABLE account (if the beneficiary qualifies) up to the ABLE annual limit without penalty. Rolling the funds to an ABLE account creates the flexibility to cover other expenses if your family’s priorities shift.
Many states offer a state tax deduction or credit for contributions, though no federal tax incentives are currently offered. In Massachusetts, single filers can deduct up to $1,000, and married filing jointly up to $2,000.⁴
Which Is Right for Your Family?
When considering how to save for your special needs child, keep in mind that you aren’t limited to using only one type of account. In fact, the options discussed above can complement one another, and together, they can form a robust savings plan for your loved one’s future.
As a recap: ABLE accounts are designed to support more frequent, day-to-day expenses, while SNTs are better suited for managing large windfalls long term. A 529 plan can help your child pursue higher education or seek out more specialized K-12 support. If you have the resources, you may find it helpful to contribute to some combination of the three. Doing so would help your family build a well-rounded financial safety net for your child.
Creating a cohesive savings plan for your special needs child certainly requires some coordination and complex planning. State-level rules, program availability, and local law differences may tip the balance in favor of one tool over another. And perhaps most importantly, distributions from trusts and ABLE plans must be managed carefully to avoid disrupting SSI, Medicaid, or other benefits.
Our team at Wingate can coordinate with your attorney and tax professional to build a thoughtful plan that fits your state’s unique rules while protecting your child’s future. Reach out to our team today to learn more.
1 Social Security Administration
2 ABLE National Resource Center
