It’s Not As Simple as “What’s Better?”: CalABLE vs Special Needs Trusts

CalABLE or a Special Needs Trust: What's the Difference?

Special Needs Trusts and ABLE accounts (CalABLE in California) share a similar purpose: to help people with disabilities save money and continue to be eligible for benefits. We get a lot of questions about whether they’re the same thing, what the difference is, and which one is “better”. The two are similar but not the same, and have different benefits in different circumstances, so let’s do a deep dive into these two ways to preserve benefits and the ways that they differ.

Oversight

Every single purchase or disbursement made from a Special Needs Trusts is overseen by a Trustee. This is a legal requirement for the Trust. And if the Trustee feels that any purchase is not appropriate, they can say no.

Most of our clients make reasonable requests, and most disbursements at JLA Trust are approved. But there are reasons we might question a client’s purchases. Sometimes it’s as simple as worrying about that person’s budget if they keep ordering food from delivery apps or making purchases on TEMU… part of a trustee’s job is to make sure funds last so our client has access to savings for a long time. There are times when we know they can find a good $2000 mattress instead of the $5000 mattress they found. Other times, the trustee may have genuine concern about a client getting scammed, or a client may have a history of gambling or being taken advantage of by people around them.

CalABLE accounts, on the other hand, are not overseen by anyone (unless the Beneficiary is conserved), and funds within the account can be spent on eligible purchases by the beneficiary as they please.

Different beneficiaries need different things! Some people could really use the professional oversight and help with budgeting, others are ok without.

Fees

Special Needs Trust fees are significantly more expensive than CalABLE fees. This is largely because with a Trust, you are paying for the fiduciary oversight of the Trustee. Since there’s no professional oversight on a CalABLE account, fees are much lower.

A CalABLE account has only $30 a year in maintenance fees. JLA Trust fees depend on the amount in the trust, but total charges, at minimum, are about $970 a year. And we’re a low-cost, non-profit pooled Special Needs Trust: many professional Trustees charge much, much more than that.

Fees & Oversight: What Are You Paying For?

Feature	CalABLE	Special Needs Trust
Who controls spending?	The beneficiary	A trustee approves disbursements
Professional oversight	No professional oversight	Yes
Help with Budgeting	Self-Managed	Trustee provides assistance when needed
Annual fees	$30 annual maintenance fee	JLA Trust fees start at $970 annually. Most professional fiduciaries charge more.
Best suited for	People comfortable managing their own money	People who want or need fiduciary oversight

So case closed, right? Assuming you can go without the benefit of fiduciary oversight, a CalABLE account is much, much cheaper.

Unfortunately, it’s never quite that simple.

Contributions

CalABLE accounts are based on 529 College Savings accounts. The rules are very similar. Any contributions made to the account are tax-deductible, and you can contribute up to $20,000 a year (a bit more can be contributed if the beneficiary is working and eligible for ABLE to Work). Up to $100,000 can be contributed while maintaining eligibility for SSI. If the account goes above that, the beneficiary will lose benefits until the account balance is below $100,000 again. (The maximum total you can have in a CalABLE account is $529,000, $100,000 is the limit if you specifically want to protect SSI.)

Special Needs Trusts have no contribution limits. There is no limit to how much you can contribute in a single year, and you can have any amount of funds in the account and still be eligible for SSI. Contributions to a Special Needs Trust are not tax-deductible. If you have, or will someday have, more than $100,000 in the account, it needs to be a Special Needs Trust. You also might need a Special Needs Trust if you receive more than $20,000 at once – even if it’s under $100,000.

Some Examples of Best Options in Different Situations

Example	Best Option	Why?
$5,000 in savings	CalABLE	This is a good option for saving and spending money on disability-related expenses, with low fees.
$25,000 in savings, with $10,000 earned from working	CalABLE	Although this is over the $20,000 maximum annual contribution limit, the ABLE to Work program allows up to an additional $15,650 to be contributed if earned through work.
$15,000 inheritance	CalABLE	This is under the annual $20,000 CalABLE contribution limit, so as long as the beneficiary hasn’t made other contributions that year, CalABLE is perfect. At JLA, we also require a minimum of $20,000 to start a trust.
$70,000 inheritance received all at once	Special Needs Trust	Even though the amount is under $100,000, with the annual contribution limit it would take four years to put this into a CalABLE account. A Special Needs Trust would be necessary to preserve benefits.
$150,000 legal settlement	Special Needs Trust	The amount exceeds the $100,000 CalABLE balance limit for maintaining SSI eligibility, as well as the $20,000 annual contribution limit. A Special Needs Trust is the best way to preserve benefits here.
$250,000 inheritance, with plans to save and spend over time	Both	A trust can hold the larger sum, while CalABLE can provide a convenient way to manage eligible expenses and take advantage of its tax benefits.

These are general examples, not financial or legal advice. CalABLE contribution limits and SSI rules can change, so check current requirements before making a decision.

Eligibility

Both Special Needs Trusts and CalABLE accounts are available to people with disabilities (as defined by Social Security’s List of Impairments). But you probably wouldn’t be seeking to set up either one if you didn’t meet this requirement.

The big difference here to qualify for a CalABLE account, the disabling condition must have begun before age 46. Pooled Special Needs Trusts can take new clients regardless of when their disability began. (Other Special Needs Trusts can only be drafted for those under 65.)

You can read a little more about CalABLE’s specific eligibility requirements here, but bottom line is, aside from the age limit, there’s not a huge difference between who is eligible for either type of account.

Purchases

The rules for CalABLE and Special Needs Trusts are very similar here, the differences are mostly in the language used. CalABLE funds must be spent on “qualified disability expenses”, which is interpreted broadly and can include education expenses, rent and housing, transportation, health costs, and almost anything that improves quality of life.

Special Needs Trust funds are not limited by the language of “qualified disability expenses”, but generally speaking, they can be spent on the same things. Our Trustee has the ability to restrict some purchases on a case-by-case basis if they feel the funds are not being used wisely.

There’s one big thing neither CalABLE nor Special Needs Trusts funds can be spent on, and that’s items for anyone besides the beneficiary. This means they can’t be used for gifts, charitable donations, anything for another family member, or any purchases for anyone else, no matter how altruistic the intent may be. In the case of CalABLE, using funds in this way will trigger tax penalties. For Special Needs Trusts, the Trustee will not allow these purchases because they are not legal.

At one point, SSI would reduce payments made if a Special Needs Trust paid for rent or food. These purchases could still be made with a CalABLE account without penalty. But this penalty was largely removed in 2024. Special Needs Trusts can pay for food and market value rent without any reductions to SSI payments.

Transferring Funds

Funds put into a Special Needs Trust are irrevocable, which means they legally cannot be taken out, used as cash, or transferred to another, only spent for the beneficiary.

Funds put into a CalABLE account are also difficult to transfer to other accounts. Doing so triggers a tax penalty.

It is, however, relatively easy to transfer funds between CalABLE accounts and Special Needs Trusts. The two accounts work well together, and for many people, it’s a great idea to have both.

Death of the Beneficiary

This is where things get a bit complex, as you need to start distinguishing not only between Special Needs Trusts and CalABLE, but also between first-party trusts (those set up by the beneficiary) and third-party trusts (those set up by parents or anyone besides the beneficiary). (Here’s a review of types of Special Needs Trusts if you need it.)

Additionally, in some cases, there’s something called a “Medi-Cal payback”. Medi-Cal bills the estate, including the Trust, for all services provided during their lifetime. For Medi-Cal recipients with disabilities, this typically wipes out all funds that might be inherited.

What Happens After The Death of the Beneficiary?

Account Type	Can It Pay For Funeral Expenses?	Is There A Medi-Cal Payback?	What Happens to Remaining Funds?
CalABLE	Yes, funeral expenses and other outstanding disability expenses can be paid from a CalABLE account after the death of the beneficiary.	No, except under specific circumstances.	Can pay for outstanding expenses before being taxed and transferred to the beneficiary's estate if they are not subject to a Medi-Cal payback.
First Party Special Needs Trust	Funeral expenses can be paid, but must be purchased before the beneficiary's death. After death, no expenses can be paid from the trust.	Yes, if beneficiary received Medi-Cal.	Typically, all or most funds will go to paying back Medi-Cal.
Third Party Special Needs Trust	Funeral expenses can be paid, but must be purchased before the beneficiary's death. After death, no expenses can be paid from the trust.	Never.	Funds can be distributed to designated heirs.

The Bottom Line

At the end of the day, CalABLE accounts and Special Needs Trusts both help people with disabilities save money and protect their benefits, but the specific rules are different. “Which one is right for me?” differs for each individual and depends on how much money you have, where it comes from, and how you want to use it. If you’re not sure where to start, JLA Trust is here to help you understand your options and plan for the future.