Families in Connecticut with disabled members who are not able to work have options to help provide financial support for those members. Two key tools are the special needs trust and the ABLE trust, which differ in important ways.
Special needs trust vs. ABLE trust
Both of these trusts allow for tax-free growth of assets and provide for income that won’t interfere with federal benefits. An ABLE trust is easy to create and cheap to set up, so it is very accessible. However, an ABLE trust has a strict limit on how much can be contributed each year. For 2022, that amount was $16,000. Some states also have maximum amounts that the trust can hold. The money in an ABLE trust can be used for a wide variety of expenses. The beneficiary of an ABLE trust must have been diagnosed before they turned 26 to be eligible.
For a special needs trust, the trust can be set up any time until the beneficiary turns 65. These trusts also have no limit on how much money they can hold. They are harder to create and require a lawyer to help. Moreover, these trusts have a narrower list of ways the money can be spent compared to an ABLE trust.
Both of these trusts are useful for different reasons, and some families set up one of each kind to take advantage of their characteristics. They share the same goal of trying to make sure the disabled party has enough income and assets to have a comfortable, dignified life for as long as possible.