Savings Strategies for Families of Children with Disabilities
Families raising a child with a disability often have access to more savings and investment vehicles than they realize, and more ways those vehicles can work against each other if left uncoordinated. Achieving a Better Life Experience (ABLE) accounts, special needs trusts, custodial accounts, education savings plans, and standard investment accounts each serve a different purpose, and each interacts differently with a child’s eligibility for means-tested benefits like Supplemental Security Income (SSI) and Medicaid. Understanding what each vehicle does well and where it falls short is the starting point. Coordinating them into a single plan is where the real value gets created.
Achieving a Better Life Experience (ABLE) Accounts
An ABLE account is a tax-advantaged savings account designed specifically for individuals with disabilities. Funds can be used for a wide range of disability-related expenses, including healthcare, education, housing, and transportation, without counting against the asset limits that govern SSI and Medicaid eligibility, as long as the account balance stays under $100,000. Crossing that threshold does not close the account, but it can suspend SSI eligibility until the balance is brought back down, so the limit is something families need to plan around rather than treat as a technicality.
Eligibility has recently expanded. As of January 1, 2026, an individual can open an ABLE account if their disability began before age 46, a significant increase from the previous threshold of age 26. This change alone makes ABLE accounts a viable option for far more families than in prior years, including families whose child’s disability emerged later in life. ABLE accounts are relatively simple to set up compared to a trust, though annual contribution limits apply, and the plans themselves are administered at the state level, so features and investment options vary depending on where an account is opened.
Special Needs Trusts
A special needs trust allows a family to set aside assets for a child without affecting the child’s eligibility for SSI, Medicaid, or other means-tested benefits. First-party trusts are funded with the individual’s own assets, while third-party trusts are funded by family members. The difference is not just administrative. First-party trusts are typically subject to a Medicaid payback provision at the beneficiary’s death, while third-party trusts generally are not, and that single difference shapes decisions about tax treatment and long-term flexibility for years to come.
Unlike an ABLE account, a special needs trust has no contribution limit, which makes it the more appropriate vehicle for families expecting to set aside significant assets over time, whether through savings, an inheritance, or life insurance proceeds. The tradeoff is complexity. Establishing and maintaining a trust requires legal guidance, ongoing administration, and often a trustee, and funds in the trust generally cannot be used for basic needs like food or housing without affecting benefits eligibility in ways that require careful management.
Custodial and General Investment Accounts
Custodial accounts, education savings plans, and standard investment or savings accounts owned by a parent each offer flexibility that ABLE accounts and trusts do not, but that flexibility comes with a cost specific to special needs planning. Custodial accounts transfer to the child’s control at the age of majority, and assets held in the child’s name become countable when determining eligibility for SSI and Medicaid, which can put benefits at risk without careful planning around timing and amounts.
Education-focused savings vehicles are most useful when higher education is a realistic path for the child. A standard investment account owned by a parent avoids the eligibility complications that come with assets in a child’s name, but it also lacks the legal protections and tax advantages built into an ABLE account or a trust.
Retirement Accounts as a Planning Tool
Parents sometimes use their own retirement accounts, including Roth individual retirement accounts (IRAs), as part of a broader strategy to support a child’s long-term care. Because Roth withdrawals in retirement are generally tax-free, and contributions can be accessed without penalty in certain circumstances, a Roth IRA can play a supporting role in a family’s plan. It is not, however, a substitute for dedicated planning vehicles like an ABLE account or a trust, since its primary purpose remains the parents’ own retirement security.
Why Coordination Matters More Than Any Single Vehicle
Each of these vehicles solves a different problem, and none of them solves every problem on its own. A family that opens an ABLE account without also considering trust design may find its contribution limits too restrictive for long-term needs. A family that relies on a custodial account may unintentionally jeopardize benefits the child will need for life. The right combination depends on the size of the assets involved, the family’s broader financial picture, and how the pieces are sequenced over time, not on selecting a single “best” option from a list.
This is the work River does with families: looking at savings and investment vehicles alongside estate documents, benefits planning, and the family’s full financial picture, so that decisions made today do not create problems years from now.