IL ABLE Accounts and Special Needs Trusts
Able UP Accounts and Special Needs Trusts Comparison
Able UP accounts and special needs trusts are different financial planning tools that can help people with disabilities save or set aside money for current and future needs.
Both may help preserve eligibility for certain means-tested benefits, such as SSI and Medicaid, if you follow program and legal requirements. However, they work differently, including who owns the money, who manages it, how you can add money, and what happens to remaining funds.
IL ABLE Account
- An Able UP account is a tax-advantaged savings and investment account for eligible people with disabilities. It can be used to save for Qualified Disability Expenses while helping the Account Owner/Beneficiary maintain eligibility for certain means-tested benefits, such as SSI and Medicaid.
- Money can be contributed by the Account Owner/Beneficiary, family members, friends, employers, or other sources, subject to annual contribution limits.
- The Account Owner/Beneficiary or their Authorized Legal Representative manages the account and decides how the money is used.
- Simply put: An Able UP account gives an eligible person with a disability a way to save and spend money for disability-related needs while maintaining greater control over their funds.
Third-Party Special Needs Trust
- A third-party special needs trust is funded with money or assets that belong to someone other than the person with a disability.
- For example, a parent, grandparent, family member, or friend may use this type of trust to set aside or leave money for a person with a disability.
- Simply put: This type of trust holds someone else’s money for the benefit of a person with a disability.
First-Party Special Needs Trust
- A first-party special needs trust, also called a self-settled trust, is funded with money or assets that belong to the person with a disability.
- This could include an inheritance received directly by the individual, money from a legal settlement, or other assets they already own.
- Simply put: This type of trust holds the person with a disability’s own money.
Pooled Special Needs Trust
- A pooled special needs trust is managed by a nonprofit organization. Each beneficiary has a separate account, but the nonprofit combines, or “pools,” funds for investment and administration.
- A pooled trust may be an option for someone who does not want or need to establish a separate individual trust.
- Simply put: A nonprofit organization manages this type of trust on behalf of the person with a disability.
| Question | IL ABLE Account | Third-Party Special Needs Trust | First-Party Special Needs Trust | Pooled Special Needs Trust |
|---|---|---|---|---|
| Who can establish it? | An Able UP-eligible person with a disability, or an Authorized Legal Representative acting on their behalf | A third party, such as a parent, grandparent, other family member, or another person | Generally, the person with a disability, a parent, grandparent, legal guardian, or court | A person with a disability, or someone acting on their behalf, such as a parent, guardian, or representative |
| Who is it for? | The eligible person with a disability, who is the Account Owner/Beneficiary. | A person with a disability | A person with a disability who is under age 65 when the trust is funded | A person with a disability who is under age 65 when the trust is funded |
| Who can contribute money? | Contributions can come from the Account Owner/Beneficiary, family members, friends, employers, or other sources, subject to annual contribution limits. | Money can come from others, but not from assets that belong to the person with a disability. | Funded only with assets that belong to the person with a disability. | A first-party pooled trust is funded with assets belonging to the person with a disability. A third-party pooled trust is funded with assets from other people or sources. |
| How are earnings and withdrawals taxed? | Earnings grow tax-free, and withdrawals are tax-free when used for Qualified Disability Expenses. | Generally taxed under trust tax rules. | Generally taxed under trust tax rules. | Generally taxed under trust tax rules. |
| What happens to the money after the beneficiary dies? | After funeral and burial expenses are paid, remaining funds may go to the Account Owner/Beneficiary’s estate or an eligible successor. Illinois Medicaid may have a right to recover certain amounts in some circumstances. A payment-on-death arrangement may also be available, when permitted. | Remaining funds generally go to the beneficiaries named in the trust. | Medicaid recovery requirements generally apply before remaining funds are distributed to beneficiaries named in the trust. | Distribution of remaining funds depends on the terms of the pooled trust and applicable Medicaid recovery rules. |
| Are there annual contribution limits? | Yes. Annual contribution limits apply. Some working Account Owners/Beneficiaries may be able to contribute additional money based on their earnings and applicable federal limits. See the Program Disclosure Statement for current limits. | No ABLE-style annual contribution limit. Limits may depend on the terms of the trust and applicable law. | No ABLE-style annual contribution limit. Limits may depend on the terms of the trust and applicable law. | No ABLE-style annual contribution limit. Limits may depend on the terms of the pooled trust and applicable law. |
| Is there a total account or asset limit? | Yes. The Able UP account balance limit is $500,000. For people receiving SSI, up to $100,000 in the account is generally excluded from the SSI resource limit. | No ABLE-style account balance limit. | No ABLE-style account balance limit. | No ABLE-style account balance limit. |
| What fees apply? | Able UP generally has lower fees than many trust arrangements and uses self-directed enrollment. See the Program Disclosure Statement for current fees. | Setup and ongoing management fees vary. | Setup and ongoing management fees vary. | Management fees vary and are determined by the organization managing the pooled trust. |