The Rules Nobody Told You: How Disability Benefits Actually Work

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If you’re the parent of a disabled child and you haven’t started planning for their financial future, I need you to hear something first: you’re not behind. You’re not a bad parent. You’ve been doing the hardest job there is — getting through each day, managing therapies and IEPs and medical appointments, holding your family together. There wasn’t bandwidth left for anything else.

Now you’re here. That’s what matters.

But I also need to tell you something that might be hard to hear: the financial system for disabled individuals operates under completely different rules than everything else you know about money. The instincts that serve you well everywhere else — save money, build assets, put funds in your child’s name — can actually hurt them.

Once you understand why, the path forward becomes obvious.

The $2,000 cliff

Supplemental Security Income (SSI) provides monthly income to disabled individuals who have limited resources. In 2026, that federal payment is $994 per month. For many disabled adults (that is once your child is an adult and receiving SSI in their own name), SSI is the foundation that makes independent life possible — and it’s often the gateway to Medicaid, which covers medical care, therapy, and support services that private insurance won’t touch.

Here’s the problem: to qualify for SSI, your child cannot have more than $2,000 in countable assets. That’s it. Two thousand dollars.

This number hasn’t changed since 1989. If it had been adjusted for inflation, it would be roughly $5,500 today. But it wasn’t. So we’re working with a limit set when a gallon of gas cost 97 cents.

If your child’s assets exceed $2,000 — even temporarily, even by accident — they lose SSI eligibility. And losing SSI often means losing Medicaid too.

A regular savings account in your child’s name counts against this limit. So does money they inherit. So do gifts from well-meaning relatives.

The grandparent trap

Let me tell you about Sandra. Her 22-year-old son has autism and receives SSI and Medicaid. These benefits cover his basic needs and the support services that help him live semi-independently.

Sandra’s mother passes away and leaves her son $15,000 directly in her will. Grandma loved her grandchild. She wanted to help him. Nobody told her the rules.

That $15,000 inheritance pushes him over the $2,000 asset limit. His SSI benefits are suspended. His Medicaid coverage is at risk. Sandra now has to figure out how to “spend down” that money — quickly and in approved ways — to get her son back under the limit and restore his benefits.

A gift meant to help became a crisis overnight.

This happens constantly. Grandparents, aunts and uncles, family friends — they want to help, so they leave money directly to a disabled person. They don’t know that the gift can cost more than it gives.

The three-legged stool

Financial security for a disabled person rests on three legs:

Government benefits — SSI, SSDI, Medicaid — form the baseline, covering basic income and essential medical care. These are the foundation you don’t want to lose.

Protected savings — ABLE accounts, special needs trusts — allow money to be set aside without counting against benefit limits. These tools exist specifically because the $2,000 limit is so restrictive.

Family support — ongoing help from parents, siblings, and others — supplements benefits without replacing them.

The goal isn’t to replace government benefits with personal savings. You can’t save enough to replace Medicaid coverage for someone with significant medical needs. The goal is to supplement benefits — to pay for things that improve quality of life beyond what government programs cover — without disqualifying your child from the benefits they need most.

The two tools you need to know about

There are two main ways to save money for a disabled person without affecting their benefit eligibility.

Because these rules are complex and vary by situation, this is about understanding the system — not replacing professional advice when larger sums are involved.

ABLE accounts are tax-advantaged savings accounts you can open yourself, no attorney needed. In 2026, you can contribute up to $20,000 per year, and balances up to $100,000 don’t affect SSI eligibility. (Balances above $100,000 can suspend SSI payments, though Medicaid remains protected.) The money can be used for disability-related expenses like housing, transportation, education, health care, and more.

ABLE accounts are the lowest barrier to entry. You can open one online in about 15 minutes. If you do nothing else after reading this, look into opening an ABLE account.

One important change for 2026: the eligibility age has expanded. Previously, the disability had to begin before age 26. Starting January 1, 2026, anyone whose disability began before age 46 can open an ABLE account. This opens the door for millions of people who were previously excluded.

Special needs trusts are legal arrangements that can hold unlimited assets without affecting benefits. They’re more powerful than ABLE accounts but require an attorney to set up — typically $3,000 or more. A trustee (often a family member or professional) manages the funds and makes distributions for the beneficiary’s benefit.

Special needs trusts make sense when you’re dealing with larger amounts — inheritance, life insurance proceeds, legal settlements — or when you want more control over how funds are used after you’re gone.

Many families eventually have both. But ABLE accounts are where to start.

The age-18 cliff (a preview)

There’s another transition point you need to know about, though I’ll cover it in more depth in a future post.

When your child turns 18, they become a legal adult regardless of their cognitive capability. This has several implications: you may need legal guardianship or conservatorship to continue making decisions for them. They may become eligible for SSI and Medicaid in their own name (your income is no longer “deemed” to them as it was when they were a minor). And the clock starts ticking on that $2,000 limit.

If your child is approaching 18, this transition deserves serious attention. But that’s a topic for another day.

What to do now

You don’t need to do everything at once. Paralysis is the enemy here, not imperfection. Start with what you can.

First, understand that regular savings accounts in your child’s name are a problem once they turn 18. Don’t open one thinking you’re helping.

Second, tell your extended family about the rules. Grandparents, aunts, uncles — anyone who might leave money to your child in a will — needs to know that direct gifts can backfire. They can still help, but the money needs to go into an ABLE account or special needs trust, not directly to your child.

Third, look into opening an ABLE account. It’s the simplest step with the biggest impact. You can find your state’s program at ablenrc.org.

Fourth, if you have significant assets to protect — or if you’re doing estate planning — talk to an attorney who specializes in special needs planning. This isn’t regular estate planning; you need someone who understands these specific rules.

I work with families navigating this all the time. A small business owner in her early 50s came to me because she’d been employing her 16-year-old son with a disability in her business — which is great — but she was paying him under the table and putting the money in a regular savings account because she didn’t know there was a better option. We got that fixed. Another family finally had mental space to think about the future after years of crisis mode with their 10-year-old. They just needed someone to explain where to start.

That’s what this series is for.

Coming next

In the next post, I’ll walk through ABLE accounts in detail — how to open one, how to use it, what counts as a qualified expense, and the mistakes to avoid. It’s something you can set up yourself this month, and it’s the foundation everything else builds on.

You’re not behind. You’re getting started.