Illinois ABLE Account & Special Needs Trust: Adults with Disabilities

Walking Through the Process...

Part 1: ABLE Accounts

Part 2: Special Needs Trust

ABLE Accounts

Step 1- Eligibility & Establishment

Before embarking on the process of establishing an ABLE account, confirm the individual meets the requirements for eligibility.  For ABLE accounts opened in IL, the eligibility criteria can be found HERE.  The eligibility quiz found HERE can also be used as confirmation the individual is eligible for an ABLE account.   

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A key part of the eligibility is the ‘onset’ of the disability before age 26.  This does not mean when the disability was diagnosed, but rather when the individual began living with the disability.  The age of onset will change from 26 to 46 in 2026.  

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Individuals will note in the account set-up if they receive or are eligible for SSI benefits or SSDI benefits (Social Security Disability Insurance) or have a qualifying disability.   A list of qualifying disabilities can be found HERE. Documentation of the disability does not need to be provided when an account is created but should be on file (click HERE and see document page 35/36 for more information).  

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When deciding to set-up an ABLE account (which stands for A Better Life Experience and was made possible by the Better Life Experience Act) it is important to consider how the account will best support the individual.  An ABLE bank account can be used like a checking account, a savings/investing account, or both.  If the account will be used to actively supplement other sources of income and benefits, then a checking feature may meet the individual’s needs.   If the account will be used to hold and grow funds for the individual to use later in life, then a savings/investing option may be best.  When setting up the account through IL, the user will choose between 7 options, ranging from checking to aggressive investing.   Money can be divided into more than 1 investment option and a checking option, thus creating a checking/savings/investment-type account.   The user can change their account option up to twice a year (switch from a checking account to savings accounts or moving to a different investment option), so there is flexibility over time.  A full list of the investing options can be found HERE.   Additional information about the checking option can be found HERE. Earnings from investment accounts grow tax deferred and if the funds are used for qualified disability expenses (see Step 4 of this guide for more information), then they are tax free (click HERE for more information, see page 31 of the document under Federal Tax Considerations).   

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An ABLE account can be set-up in any state that offers this benefit.  Illinois residents and individuals who live in other states can open up an IL ABLE Account.  Depending on how the account will be used might inform where the account should be set-up.  To compare account perks between states, see the comparison chart found HERE.   Choose up to 3 states to compare from the drop downs at the top and then scroll down to see their similarities and differences.   There are tax benefits to establishing an ABLE account through IL’s program, including saving tax free (up to $100,000) and tax deductions up to $10,000 if filing as an individual or $20,000 if filing jointly.  

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Before moving to Step 2, know that only one ABLE account can be opened in the individual’s name.  The individual can not have more than one ABLE account that benefits them, even if the accounts are in two different states.

Step 2- Account Set-Up

ABLE accounts can only be set-up by an authorized individual either online or by mailing in a paper application.  ABLE accounts cannot be set-up through a bank branch.  

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Authorized individuals are considered the individual with the disability (account owner) and, in order of priority, 

1. Authorized agent under power of attorney

2. Legal guardian

3. Spouse

4. Parent

5. Sibling

6. Grandparent 

7. Social Security Administration representative payee   

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An ABLE Account can be created by an SSA approved Rep Payee if there is not someone with a higher eligibility (listed above) who is willing to open the account.   Additional information about authorized individuals can be found HERE. 

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If opening an account with IL, the website for online set-up can be found HERE and the paper application HERE. 

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There is no set-up fee for an ABLE account and the initial deposit can be as little as $25.  

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When setting up the account, either online or paper form, the following information and materials will be needed:

• ​Individual’s personal information (name, date of birth, address, Social Security Number, phone number, etc.)
• ​Account owner’s state-issued identification information and mother’s maiden name, if opening for an adult individual
• ​Authorized individual’s information, if someone other than the individual is creating the account
• ​General knowledge of the individual’s disability (select from a short list of disability category groups)
• ​Awareness of whether the individual receives SSI/SSDI benefits or if they are eligible through a formal diagnosis (proof does not need to be submitted)
• ​Power of Attorney for an Authorized Individual
• ​Email address for electronic delivery of statements
• ​Plan for how to distribute (%) money between checking and/or investment options
• ​Contribution (deposit) into the account (can be paid via a check or recurring deposits, payroll deposit, electronic funds transfer (EFT), rollover from another state’s ABLE account, or rollover from a 529 account. *Depending on the contribution method, there may be additional follow-up steps to complete the deposit and/or specific account information required.

For checking accounts, monthly fees can be reduced or waived by either having statements delivered electronically or maintaining a daily balance above $250.00.  For checking accounts, account holders can order checks for $6.  

Accounts can be set-up in about 1 hour, with the account checking/investment option selection and contribution set-up taking the most time.  

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If setting-up an account for an individual who has a legal guardian, the official letter of guardianship will need to be submitted for proof before the account is completely set-up.  Directions for what to include and where to mail the proof are shared during the set-up process.  

Step 3- Use It

Once the account has been created, deciding how and when to deposit into the account to allow it to grow (if investing) or be spent (for checking) will keep it functioning.  

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Deposits can be made using direct deposit.   Individuals can set this up in one of two ways, online choose ‘Payroll Direct Deposit Form- Do It Online’ or by paper form, if the employer offers this paycheck feature.  Direct deposits can also be set-up through other account deposits or transfers, recurring or sporadic.  

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Deposits can be made through electronic contributions via electronic fund transfers (EFT), wire transfers, and by paper checks.  Forms and additional instructions for how to complete those types of deposits can be found HERE.  

An ABLE account can accept up to $18,000 a year, which includes general deposits, 529 or other ABLE rollovers, and gifts.  If another individual has an ABLE account, like a sibling, and their account closes then the remaining funds can be transferred to another ABLE account.   The rollover total cannot exceed $18,000 in 1 year.  Funds from 529 accounts, also called College Savings Plan accounts, can also be rolled over and the same limits apply.  It is important to note there are current time limits to 529 rollovers of Jan 1, 2026, per federal law.    

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If the individual earns an income through a job, they can contribute more.  Workers can contribute an additional $13,590 OR the gross total of their income, whichever is less, in a calendar year.   Therefore, if an individual earns $8,000 in gross income, then they cannot deposit an additional $5,590 in other money to reach $13,590.  They can only deposit an additional $8,000 over the standard $18,000, because that is their total gross income.  The form to allow for earned income deposits can be found HERE.   Additional information about worker contributions can be found HERE.  

Cash can also be gifted directly into the account using the UGiftABLE website.   This is an easy way for others to contribute to the account without having to share specific account information.   Since high value gifts may impact the individual’s ability to make their regular deposits, be sure those who are planning to gift alert the individual and authorized individuals if a large contribution will be made.  

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Benefits like SSI are intended to be spent on current living needs, however that money can be deposited into an ABLE account.   Keep in mind that direct SSI deposits count towards the $18,000 yearly limit.  Therefore, if there are other contributions being made to the ABLE account then waiting to move remaining SSI funds at the end of a monthly cycle into the ABLE account allows for more flexibility.   There is guidance found HERE from the SSA about how to name and manage ABLE accounts as it relates to SSI payments.  Specific information from SSA as it relates to representative payees and direct deposit can be found HERE. 

Step 4- Spend & Save

Whether the account is set-up as a checking account or investment account or a blend of the two, if the balance is below $100,000 then SSI eligibility/payments will not be impacted.  If the balance exceeds $100,000 then SSI payments may be suspended until the balance drops below $100,000.  The overall ABLE account balance does not impact other government benefits like SSDI, Medicaid, SNAP (Supplemental Nutrition Assistance Program), and HUD housing.  Additional information about when to count ABLE account balances and distributions can be found HERE, scroll to part D. 

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There is no fee for spending money in the account as long as the purchases benefit the individual, which are called Qualifying Disability Expenses.  Qualified Disability Expenses (QDE) intentionally covers a very wide variety of purchases, with the US  Treasury defining QDEs as basic living needs, education, personal support services, assistive technology, transportation, housing, job coaching, and more.  If the money spent improves the individual’s quality of life, health, supports greater independence, or is associated with their disability then it would fall under QDE.   For example, if participating in weekly recreational programming enhances the quality of the individual’s life, then the fees associated with the programming could be paid with money from their ABLE account.  More information about qualified expenses can be found HERE.   A general list of qualified disability-related expenses can be found HERE, under section 8 and 9. Purchases that are made with ABLE account funds that are not QDE’s may be subject to fees and/or taxes.  

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If the ABLE account is being used as a checking account, account balance information can be found online, and a debit card will be sent for purchases.  Fee-free ATMs can be found by searching HERE. 

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Individuals are encouraged to maintain receipt records for purchases made with money from their ABLE account as it may be helpful if the account or individual is audited.  ABLE account withdrawal dates and amounts are reported monthly to SSA via an automated system.  The IRS also receives automated reports regarding the account. 

As with any money management account, there are fees.  Fees can be reduced by choosing  paperless/e-delivery option, from $58 to $33 for 2023, and fees are pulled from the account on a quarterly basis.  For investment accounts, there are fees ranging from 0.30-0.33%, depending on the chosen investment option.  

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While there are fees, there are also tax benefits.   For individuals who set-up an ABLE account in IL, there are deductions of up to $10,000 for individuals or $20,000 if filing jointly.  Consult a tax professional for guidance on the individual’s case.  

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While IL is actively passing laws and working to implement change, there is still a Medicaid Recovery (or Medicaid Payback) process when an individual with an ABLE account passes away.  

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When an individual passes:

1. The remaining funds in the account will be used for outstanding QDEs and funeral/burial expenses.  

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2. If there are remaining funds that go into the estate of the individual, then Medicaid can make a claim.  Whether Medicaid would receive any money depends on the type of Medicaid benefits the individual received before they passed.  

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3. If the individual identified a successor beneficiary, then all remaining funds will be transferred to them.  

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Each case of Medicaid Recovery is unique thus making it challenging to interpret how it would generally impact an individual in this guide.  

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ABLE should be alerted if the individual’s personal information changes via the form found HERE. 

Special Needs Trust

Step 1- Assessing Assets

A special needs trust may also be referred to as a supplemental needs trust as it can supplement the benefits an individual is eligible to receive.  Since the assets are held under the trust and not with the individual, the individual remains eligible for other benefits.   Similar to ABLE accounts, an individual must have a qualifying disability according to the Social Security Administration.   

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While an ABLE account is a safe-zone for cash, a special needs trust is a safe-zone for cash and other assets.  If the individual has other assets in their name or has plans to or potential to acquire other assets, then a special needs trust would allow them to possess cash and other assets while maintaining eligibility for other benefits, like SSI. 

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Examples of assets:

•Payouts from insurance policies

•Inheritances

•Investments in their name

•Bank accounts in their name

•Child support

•Large gifts

•Settlements

•Property

An individual can have both an ABLE account and a special needs trust.  

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The purpose of a special needs trust is to support the individual and can be used to supplement other benefits to achieve the type of care they and their loved one’s desire. 

Step 2- Types of Trusts

There are two common types of trusts and below is an overview of each one.   While one type of trust may be considered ‘more ideal’ or ‘less ideal’ than another, it often comes down to the type of assets that are being protected that will dictate the type of trust that can be created.  

*The information shared below is not intended to be a recommendation, but rather an introduction into the options that are available.  There may be other trust options not mentioned below and a skilled licensed attorney should be consulted before establishing a trust for an individual.  

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1st Party Trust:

1st Party trusts are opened by the individual using money or assets that are in their name.  The name ‘1st party’ comes from the individual, like using 1st person language when writing, creating their own trust.  A 1st party trust is also commonly referred to as a Self-Settled Trusts, (d)(4)(A) Trust, or Pay-Back Trust.  While is can be created by the individual, other loved ones can create the trust on their behalf.  

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This type of trust might be necessary if the individual has received or will be receiving a settlement in their name, or the individual had assets prior to becoming disabled.   

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1st party trusts cannot be revoked and are subject to Medicaid Payback, similar to ABLE accounts Medicaid Recovery, when the individual passes away.  

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3rd Party Trust:

3rd Party trusts are opened by someone other than the individual (like family members) who has money or assets they want to gift/pass to the individual.  The name ‘3rd party’ comes from the person, like using 3rd person language when writing, who creates the trust for the individual.  

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3rd Party trusts can be revoked and modified, if necessary. Since the individual never ‘owned’ what is in their trust, a 3rd party trust isn’t subject to Medicaid payback when the individual passes away.   

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Pooled Trust:

A Pooled trust is a 1st or 3rd Party trust that is managed by a non-profit organization along with other individuals trusts.  Meaning, a Pooled trust is not a type of trust, but rather how the trust to overseen.   Pooled trusts are also referred to as (d)(4)(C) trusts and may come with special fees.  

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A pooled trust combines trust assets from a group of individuals, or a pool of people, to invest and be managed together.   A pooled trust may allow the individual to have access to experienced staff within the non-profit who can ensure it is well managed and up to date with changes to the law.  For individuals with no other option for a trustee, a pooled trust can provide the necessary management.  

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A pooled trust cannot be revoked and when the individual passes away the non-profit organization who is managing their trust may keep a portion or all of the remaining assets.  

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Since trust law varies by state, setting up a trust with an attorney from IL or with a long history of state experience can ensure all the nuances are considered and included in the drafted trust.    Selecting an attorney who is both familiar with IL state and federal trust and benefit laws can ensure funds and assets are properly managed, allowing for appropriate care and continued eligibility for other benefits.  

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The Special Needs Alliance is a well-known group of attorneys who specialize in law related to individuals with disabilities.   This alliance has an attorney directory that can be found HERE to assist in finding in-state attorneys.    When considering attorneys to work with, it may be helpful to ask about their recent experience drafting a variety of trusts and to share recent law changes, as well as if they have asset or estate's value minimums (such as $500,000+).  

Choosing the right attorney should not be taken lightly as trusts have tax, benefit, and legal implications and fielding input from other families as to their experience with both drafting and managing their trusts may be helpful when making the final decision.

Step 3- Choosing a Trustee

Nearly as important as selecting an attorney is choosing a trustee to manage the trust.  Before naming someone as a trustee, it is vital that they understand the level of commitment required to fulfill the role.  

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A trustee is charged with managing a trust and the duties are serious and require a full understanding of a variety of benefit and legal rules and limits.  A trustee is charged with managing payments and how to best spend or give funds to receive the most of other benefits, like SSI.  Intertwining trust duties, knowledge of benefit rules, and the individual’s needs and wants can be cumbersome and takes a full understanding of benefit and trust rules.  Trustees will need to consider all options and the impact different decisions may make on future payments, income, and benefits.  The title of an asset matters and future large purchases, like that of a house, may also have a long-term impact.  

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Trustees not only need to have the individual’s confidence that they will make thoughtful decisions and take action in the individual’s best interest, but also be willing to commit time to understanding how one decision has a domino effect on others.  A trustee may need to execute trust-related duties multiple times a month.  

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A trustee needs to take into consideration both the individual’s needs and the overall health of the trust and its beneficiaries and align their actions with their duties, including remaining impartial, refraining from self-dealing, and delegating appropriately. 

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Courts may also require the trustee to be bonded, either initially or long term.  Bonding may be necessary for the security of the trust as it serves as an insurance agreement that the trustee will properly execute their duties.  

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The attorney who drafts the trust may charge the trustee with action items to complete either before or after the trust is created.  

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More information about trustee duties is available in the Special Needs Alliance’s Trustee Handbook found HERE. 

Step 4- Drafting, Executing, and Fees

Once the trust is drafted it can be executed by the trustee.  

There are costs associated with establishing a trust, including attorney, accountant, and trustee fees.  While some fees may need to be paid outright, some fees may be paid with the funds from the trust.  Keep in mind that initial low-cost fees may result in future higher costs or loss of certain benefits, especially if inexperienced professionals misadvise.  

Also, anticipate that a trust may have ongoing fees for management, monitoring, and consults, including when the individual passes.