Financial Tools for People with Disabilities in New Jersey: ABLE Accounts, Special Needs Trusts, and Supplemental Benefits Trusts

Planning for a person with disabilities often requires balancing two goals at the same time: preserving access to important public benefits and making sure the person has resources that can improve quality of life. The planning tools discussed here are designed for people with disabilities who have, or may later need, government benefits, as well as for family members who want to plan responsibly for a loved one’s future. Because many benefit programs apply income and resource tests, families should think carefully about how money, inheritances, insurance proceeds, settlements, and savings are titled and distributed.

ABLE accounts, Special Needs Trusts, and Supplemental Benefits Trusts can each play an important role in disability benefits planning. Each tool works differently, and the right option depends on whose money is being used, how much money is being received, the beneficiary’s age and capacity, the type of benefit involved, and the family’s long-term goals. Families should not wait until a crisis or inheritance occurs to begin planning; instead, families should plan now and revisit the plan when circumstances change.

Why Family Planning Matters

For many families, disability planning begins with a central concern: “How can we help without accidentally hurting benefits?” Government benefits such as Supplemental Security Income, Medicaid, and services through the Division of Developmental Disabilities (“DDD”) can be essential, and eligibility depends on income and resource limits. In fact, Medicaid eligibility is necessary for eligibility for DDD services, which makes benefits planning especially important for families providing long-term support for individuals with intellectual and developmental disabilities.

Family members often want to leave an inheritance, buy life insurance, or set aside funds for a loved one with disabilities. Without proper planning, those assets may be counted as available resources or may create income issues for the beneficiary. A thoughtful plan can help preserve benefits while still allowing family resources to be used for the beneficiary’s comfort, independence, and quality of life.

ABLE Accounts

An Achieving Better Life Experiences (ABLE) account is a savings tool created under a law passed in 2014 for eligible individuals with disabilities. Eligibility generally requires disability onset before age 46.  It should be noted that prior to 2026, the disability onset was required to be prior to age 26. To establish disability onset, the individual may have a Social Security determination of disability or by having a physician’s certification.

ABLE accounts are flexible because the person with disabilities and others can contribute to the account.  Unfortunately, the aggregate contribution is $20,000 (2026) per year.  If the account owner is over 18 and has capacity, the person with disabilities may open the account; otherwise, a parent, legal guardian, or agent under a power of attorney can open it. An ABLE account can be opened through any state’s program; however, you can only have one ABLE account at a time.  New Jersey’s ABLE accounts can be opened here: https://savewithable.com/nj/home.html. 

Funds in an ABLE account may be used for Qualifying Disability Related Expenses (QDRE), which is broad.  QDRE’s include food and shelter, education, transportation, assistive technology, health, legal fees, funeral expenses, and other disability-related expenses. This flexibility can make ABLE accounts particularly useful for day-to-day planning, especially where family members want a relatively straightforward way to help pay for disability-related needs.

Importantly, ABLE accounts are not an ideal place to accumulate money, especially money belonging to third parties (i.e. money belonging to someone other than the person with disabilities).  Like with Special Needs Trusts, ABLE accounts are subject to a payback provision which means that any funds remaining in the account upon the beneficiaries death can be used to pay back Medicaid for any payments made during their lifetime.  Additionally, to the extent there are funds accumulated over $100,000, the amount over $100,000 is a countable resource for SSI eligibility.  For these reasons, families should understand the account’s treatment before relying on it as a planning tool.

Special Needs Trusts

A Special Needs Trust (a.k.a. First-Party Special Needs Trust) is designed to provide assets for the special needs of a beneficiary with disabilities so that the beneficiary can live a more productive and comfortable life.

Special Needs Trusts can be especially important when the beneficiary receives money directly, such as through an inheritance that was not properly directed to a Supplemental Benefits Trust, personal injury settlement, savings, or other assets. The Special Needs Trust is funded with the beneficiary’s own assets and established by the individual, a parent, grandparent, guardian, or court. Critically, the beneficiary must be under age 65 when the trust is established and funded.

Like with the ABLE account, the Special Needs Trust is subject to a payback provision.  In exchange for the beneficiary being permitted to keep these resources in an account and maintain eligibility for their means-tested benefits, Medicaid requires that they receive a payback for benefits paid over the individual's lifetime from any funds remaining in the trust upon the beneficiary’s death.   For this reason, the use of the funds is highly scrutinized.  Distributions are intended to supplement, not supplant, government benefits and must be used for the sole benefit of the beneficiary.  Moreover, cash distributions are problematic because cash is treated as income and reduces SSI dollar for dollar.  Choosing a trustee, whether an individual trustee or a corporate trustee, is critical in ensuring that distributions are made in a way that does not jeopardize the individual's eligibility for various means-tested programs that may be critical to their independence and care.

Supplemental Benefits Trusts

A Supplemental Benefits Trust (a.k.a. Third-Party Special Needs Trust) is funded with assets belonging to someone other than the beneficiary, which makes it a particularly important planning tool for parents, grandparents, siblings, and other family members.  For example, an inheritance directed to a Supplemental Benefits Trust prior to the owner’s death is an asset belonging to a owner; however, if it is not directed to the trust, then the same inheritance would be the asset of the beneficiary (and accordingly could not later be directed to the Supplemental Benefits Trust).

A Supplemental Benefits Trust can be established by anyone for the benefit of a person with disabilities. In other words, a parent, grandparent, sibling, etc. can establish this type of trust for the benefit of their family member with disabilities.  Supplemental Benefits Trusts are often used for inheritances, life insurance proceeds, and other family assets. A family member may create this type of trust as a stand-alone trust during life or as a testamentary trust that takes effect through an estate plan. Importantly, unlike a Special Needs Trust (described above) a Supplemental Benefits Trust has no age limit and no payback provision. The person who creates the trust can also decide where remaining trust funds will go after the beneficiary’s death (i.e. no payback provision).

The Supplemental Benefits Trust is the right vehicle for long-term planning because it allows family wealth to be directed for the beneficiary’s benefit without impacting their eligibility and without requiring a payback provision. This can be especially important where parents or other relatives want to leave assets for housing-related needs, support services, transportation, technology, recreation, or other expenses that improve quality of life without replacing public benefits. Because the trustee has discretion over distributions, choosing the right trustee is a central part of the planning process.

Choosing the Right Tool

ABLE accounts, Special Needs Trusts, and Supplemental Benefits Trusts are not interchangeable. An ABLE account may be a practical savings and spending tool for qualified disability expenses, while a Special Needs Trust may be better suited for larger assets, inheritances that were not properly planned for, settlements, or situations requiring trustee oversight. A Supplemental Benefits Trust is especially useful when family members are planning with their own assets.

Families should pay close attention to the source of the funds. If the money belongs to the beneficiary, a Special Needs Trust or similar planning may be required. If the money belongs to a family member, a Supplemental Benefits Trust may allow the family to plan more flexibly and avoid a payback requirement. If the goal is to provide a smaller, flexible account for qualified disability expenses, an ABLE account may be helpful, subject to eligibility, contribution, balance, and payback rules.

When to Start

The best time for family members to plan is before assets are transferred.  Families should plan now and revisit planning when circumstances change. Important planning moments include an inheritance that was directed by Will, intestacy (i.e. no Will), or beneficiary designation outright to the person with disabilities, a personal injury settlement, the beneficiary approaching age 65, or savings becoming an issue after a sudden onset of disability.

Disability benefits planning is highly fact specific.  Ryann M. Siclari is an expert in this field and can apply the family’s financial situation to the rules of the relevant programs. Because each situation is different, the key is to use the right tool for the person’s specific benefits, assets, age, family structure, and long-term support needs.

For families of people with disabilities, the planning goal is not simply to preserve benefits. The larger goal is to create a structure that supports dignity, stability, and quality of life over time. ABLE accounts, special needs trusts, and supplemental benefits trusts each offer a different way to help meet that goal, and families who plan early can make more thoughtful choices before a crisis or unexpected transfer occurs.

We are available to discuss this important and ever-changing topic with you. Please call 908.335.9601 to set up a consultation.