The information in this column is not intended as legal advice but to provide a general understanding of the law. Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstances.
Last week, I mentioned ABLE accounts as a possible tool for loved ones with disabilities. In this week’s column, I decided to give a little more information on this subject. One account some families use to provide for adults with special needs is an ABLE account, a tax-advantaged savings account for individuals with disabilities, named for the Achieving a Better Life Experience Act of 2014.
Planning for the future can be overwhelming, but creating a care plan is one place to start for a family dealing with a member who has a disability. Your loved one might qualify for local or federal benefits, and you might be able to save for their needs in a tax-advantaged ABLE account. For long-term planning, you might consider a special-needs trust for an individual. When you have a family member with special needs, you think about so many things all at once that future planning often gets shunted aside in favor of getting through today. But most of the challenges you face are not temporary. So when you are ready, you might consider thinking through the whole life cycle of help that is ahead of you.
A good test for when you need to do advanced financial planning for an individual with special needs is whether you anticipate them needing assistance with self-care throughout adulthood. Once you determine the severity of the need, you can figure out which levels of local and federal benefits are involved.
Individuals lose eligibility to certain government benefits if they have more than $2,000 in countable resources ($3,000, if married), according to the Social Security Administration. But by saving in an ABLE account, some families can help shield contributions from that countable-resources limit. What's more, after-tax contributions to these accounts can grow tax-deferred, and if withdrawals are used for qualified disability expenses, which include but are not limited to rent, food, transportation, education and employment training, health care, and personal support services, any earnings on such distributions will be federal income tax-free. These accounts don't make sense for everyone, so consult a financial advisor to see if they're a good strategy for you.
It's important to know that ABLE accounts do have an annual contribution limit. In 2025, the limit is $19,000 from all contributors, aggregated. However, the ABLE to Work provision of the Tax Cuts and Jobs Act of 2017 allows ABLE account owners who can work to save an additional amount equal to the lesser of their compensation for the taxable year, or an amount equal to the federal poverty level, which is $15,650 per single-person household in 2025. Additionally, if the total assets in the ABLE account exceed $100,000, Social Security for the person with disabilities may be suspended.
It can be hard for families to look far down the road and think about what happens when primary caregivers are no longer able to care for their loved one, but planning for the future can prevent mistakes later that could negatively impact benefits and cause conflict.
For instance, it may not be a good idea to name a person with special needs as a beneficiary on a parent's financial or retirement accounts. If the assets go to the child, it could affect their ability to receive Social Security disability benefits.
There are several types of trusts that many families establish for the benefit of individuals with special needs. One of the most common is a third-party special needs trust, created by someone who wants to leave money to a dependent with special needs but doesn't want that person to lose government benefits. The trust can be established by a Will or created during the benefactor's lifetime. The creators of the trust appoint a trustee who has discretion over when and how funds are distributed. The trustee cannot distribute money directly to the dependent, but they can pay for certain items and services not covered by the dependent's monthly Supplemental Security Income (SSI) for disability. Upon the death of the dependent, any assets remaining in the trust may be distributed according to the creator's wishes as specified in the trust's terms. A third-party special needs trust can be used in conjunction with an ABLE account, so families needn't choose one or the other.
All estate plans need to evolve over time to keep pace with changes in people's lives and financial situations. When your family is dealing with an individual who has special needs or disabilities, it is even more important to include them in your plans. To keep your plan current, review it every 3 to 5 years, or whenever your life or your family changes in a major way. That way, you can be confident that your loved ones will be cared for when you're no longer here to look after them financially.
Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas.