Your aunt leaves your adult son $15,000 in her will, and you worry the gift could cost him Supplemental Security Income (SSI) or Medicaid. A special needs trust holds money for someone with a disability under a trustee’s control. An Achieving a Better Life Experience (ABLE) account is a tax-advantaged savings account the beneficiary can often manage directly. The right choice depends on the amount and source of the money.
Small inheritances often fit in an ABLE account
In 2026, deposits from all sources can total $20,000 per year, a limit the IRS adjusts annually. Your son can open one if his disability began before age 46, the cutoff since January 1, 2026. Colorado law bars the state from claiming a Colorado ABLE account after the owner dies, unless federal law requires it. Money left to him outright may still count against SSI, so the will should direct the gift.
Larger settlements usually need a special needs trust
A $200,000 injury settlement will not fit under the yearly ABLE cap, so a first-party trust funded with the beneficiary’s own money usually fits better. Federal law generally requires creating this trust before age 65 and repaying Medicaid from what remains after death, though older adults may use a pooled trust instead.
Many families pair the two, with the trustee moving money into an ABLE account each year, up to the limit, so your loved one handles everyday costs while the trust protects the larger balance. Colorado’s Medicaid agency reviews every trust tied to an applicant, and first-party trust rules call for careful drafting.
Working adults can save more in an ABLE account
If your loved one works and has no employer retirement plan, they may add up to $15,650 more of their own 2026 earnings. SSI ignores the first $100,000 in savings in an ABLE account, and above that, SSI payments may pause while Medicaid generally continues.
Grandparents have two ways to give safely
Grandparents can give directly to an ABLE account, but those gifts share the $20,000 yearly limit. A third-party special needs trust in a grandparent’s estate plan has no yearly cap and no Medicaid payback, so leftover funds can pass to other relatives.
The source of the money guides your choice
Small gifts and earnings often belong in an ABLE account, while settlements and large inheritances usually call for a trust, and many Colorado families benefit from both. Before money changes hands, review wills and beneficiary designations so each gift lands safely. An estate planning attorney can help you match each source to the right tool.