Understanding ABLE Accounts, Special Needs Trusts and Pooled Trusts

All options are available to you: an ABLE account, a special needs trust or pooled trust.

ABLE Account

• The annual contribution to an ABLE account is set by law and may change from year to year based upon the annual gift tax exclusion amount. In 2023, the amount of total contributions is $17,000 for all ABLE plans.
• Anyone can contribute to an ABLE account.
• Certain working ABLE account owners may contribute more to an ABLE account under the ABLE to Work Act if they or their employer have not contributed that calendar year into certain retirement accounts such as a 401(a), 403(a), 403(b) or 457(b) account.
• ABLE account owners who work, and do not have contributions made to a retirement plan for the tax year, may make additional contributions to their ABLE account, up to the amount of their employment earnings. In 2023, the amount is limited to whichever is less: ABLE account owner’s earnings for that tax year OR:
  • $13,590 if you live in the continental U.S.
  • $16,990 if you live in Alaska
  • $15,630 if you live in Hawaii
• These amounts apply to calendar year 2023. They change annually each spring and are based upon the federal poverty levels (FPL) in effect for the year prior to when the contributions are made. Use the Decision Guide, “Finding the Funds to Save in an ABLE Account,” to learn more about contributions.
• A Section 529 qualified tuition program account may be rolled over into an ABLE account up to the annual contribution limit. If the 529 balance exceeds the annual contribution limit for the ABLE account, the remaining balance may be rolled over in future years.
• An ABLE account falls under Section 529 of the IRS tax code. The total ABLE (529A) account balance over time cannot exceed the state limit for 529 college savings accounts in the state where the ABLE plan is opened. They are different in every state and range from $235,000 to $550,000. You can find the limit for your ABLE plan by using the map comparison tool. If your ABLE account exceeds this limit, excess contributions must be returned to you.
• Consider the differences in set-up fees and ongoing fees between an ABLE account and SNTs and PTs in making your decision. Review the “ABLE Account, Special Needs and Pooled Trust Comparison Chart” along with the state ABLE plan disclosure document to compare.

Special Needs Trust or Pooled Trust

• There is no limit on annual contributions to an SNT or PT and no limit on the amount of funds which may be saved in the account.
• Some, but not all pooled trusts (first- and third-party) allow the person with the disability (i.e., beneficiary) to contribute earnings.
• Family members may make contributions to a third-party SNT, but no funds of the person with the disability (i.e., beneficiary) may be added.
• Third-party funds may not be added to a first-party SNT.
• There is no limit on the monetary or non-monetary savings in a SNT or PT.
• Consider the differences in set-up fees and in ongoing fees between an ABLE account and SNT and PT accounts. Review the “ABLE Account, Special Needs and Pooled Trust Comparison Chart” along with the state ABLE plan disclosure document to compare.

All options are available to you: an ABLE account, an SNT or PT.

ABLE Account

• You may open an ABLE account, however, contributions are limited to $17,000 per year (2023). If you are employed, an ABLE account allows certain ABLE account owners the option to save more than the annual $17,000 contribution limit if they or their employer have not contributed into certain retirement accounts such as a 401(a), 403(a), 403(b) or 457(b) Learn more about the ABLE to Work Act.
  • Some, but not all, pooled trusts (first- and third-party) allow the person with the disability (i.e., beneficiary) to contribute earnings.
• If you are not employed, you may want to consider employment so that you have more income to save. Those who receive SSI and/or SSDI may use SSA work supports to help them to earn more while keeping their benefits, including health benefits such as Medicaid and Medicare. SSI and SSDI beneficiaries who are ready to work, or are working, need to request free benefits counseling services. This important free service is provided by Work Incentives Planning and Assistance programs  that have trained staff called “Community Work Incentive Coordinators” or CWICs for short. The information can help a person reach their employment and financial goals.
• A Section 529 qualified tuition program account may be rolled over into an ABLE account up to the annual contribution limit. If the 529 balance exceeds the annual contribution limit for the 529 ABLE account, the remaining balance may be rolled over in future years.

Special Needs Trust or Pooled Trust

• If you are not employed, and have more than $17,000 from an inheritance, a large windfall or other source, an SNT or PT may be an option for saving all or a portion of the funds. Up to $17,000 may be contributed to an ABLE account. An amount above $17,000 may be saved in a trust or spent down to purchase an item the person needs.
• There is no limit on the monetary or non-monetary savings in an SNT or PT.

Do you have non-monetary assets to save?

• Yes
  • ABLE account: An ABLE account can only accept cash or equivalent contributions. If you only have non-monetary assets to save, an ABLE account is not an option for you unless you convert the assets to cash to deposit into the ABLE account. There may be tax consequences and may impact SSI and Medicaid.
  • SNT or PT: If you have non-monetary assets to save such as property, life insurance, investments or other assets, an SNT or PT is an option. It can also accept monetary (cash) contributions. You may, of course, convert assets to cash to deposit into an ABLE account, but may have tax consequences as a result.
• No
  • All options are available to you: an ABLE account, an SNT or PT; however, there are yearly contribution limits for ABLE accounts.