Aug222025
Probate Q&A Series

How do ABLE accounts work for holding trust sale proceeds to maintain benefit eligibility? – North Carolina

Short Answer

ABLE accounts can help a North Carolina beneficiary with a qualifying disability keep needs‑based benefits by sheltering a limited amount of funds. Annual contributions are capped, and Supplemental Security Income (SSI) generally disregards up to a set ABLE balance before cash benefits are affected. Because home‑sale proceeds often exceed those limits, ABLE accounts are typically used alongside a special needs trust (via decanting or court modification) or targeted spend‑down to protect eligibility.

Understanding the Problem

In North Carolina, can you use an ABLE account to receive part of the proceeds from a trust’s sale of a house so the beneficiary can keep needs‑based disability benefits? Here, the trustee occupies the home, the trust lacks special needs provisions, and the trust would otherwise distribute sale proceeds outright.

Apply the Law

Under North Carolina law, outright cash from a trust sale can count as a resource for means‑tested programs. An ABLE account is a tax‑advantaged disability account the beneficiary (or an authorized representative) can use for qualified disability expenses. Anyone can contribute, but annual contribution limits apply and change over time. For SSI, a portion of ABLE account funds is excluded, with cash benefits affected above a threshold; Medicaid rules are more forgiving, but distributions for certain expenses (like housing) can still create month‑to‑month eligibility issues if not timed and documented properly. When a trust lacks special needs terms, North Carolina provides tools to retrofit the plan—such as decanting to a new special needs trust for a disabled beneficiary, or judicial modification—so that larger proceeds can be held in a non‑countable form while still allowing ABLE funding for flexible expenses.

Key Requirements

  • ABLE eligibility: The beneficiary must meet disability criteria, and the disability onset rules must be satisfied. An authorized representative may open the account if needed.
  • Contribution caps: Total annual contributions to the ABLE account are limited. Extra “ABLE to Work” contributions may be possible if the beneficiary has earnings. Limits adjust periodically.
  • SSI/Medicaid treatment: Up to a set ABLE balance is generally excluded for SSI; amounts above that can suspend SSI cash benefits until reduced, while Medicaid may continue. Housing‑related distributions can affect SSI if retained into the next month.
  • Trust coordination: A trustee may contribute sale proceeds directly to the beneficiary’s ABLE account, but only up to the annual cap; larger amounts typically require a special needs trust (first‑party or pooled) to avoid resource spikes.
  • NC trust fixes: If the current trust lacks special needs language, decanting to a special needs trust for a disabled beneficiary or seeking a court‑approved modification can add non‑countable protections.

What the Statutes Say

Analysis

Apply the Rule to the Facts: Because the trust lacks special needs provisions, an outright distribution of home‑sale proceeds to the trustee‑beneficiary could be a countable resource. An ABLE account helps only up to the annual contribution cap and within SSI thresholds, so it cannot absorb full sale proceeds. To protect eligibility, use ABLE for a capped portion and move the balance into a properly structured special needs trust through decanting or a court‑approved modification; time any distributions to avoid month‑to‑month SSI resource issues.

Process & Timing

  1. Who files: The beneficiary or authorized legal representative opens an NC ABLE account; the trustee manages the sale and distributions. Where: ABLE enrollment is through the state program; trust modifications are filed in Superior Court (county of principal place of administration). What: For court action, file a civil petition to modify or approve a special needs trust; for decanting, provide the required written notice and copies of the first and second trusts. When: Decanting notice must precede the effective date by at least 60 days; ABLE contributions should be completed before the first day of a month to avoid resource spikes.
  2. Complete the real estate closing: pay mortgages, liens, and sale costs. Coordinate so the trustee contributes up to the ABLE annual cap directly from the trust to the ABLE account. In parallel, prepare documents to decant into, or establish, a compliant special needs trust for the remaining proceeds.
  3. Finalize: If decanting, close after the notice period; if judicial modification, obtain the Superior Court order. Then distribute the remaining proceeds into the special needs trust. Maintain records showing ABLE deposits and qualified disability expenses.

Exceptions & Pitfalls

  • ABLE limits: Annual caps are strict; large real estate proceeds won’t fit. Revisit limits annually and consider “ABLE to Work” only if the beneficiary has earnings.
  • SSI housing trap: ABLE withdrawals held into the next month for housing can affect SSI; align timing so housing payments clear in the same month.
  • Decanting mechanics: You cannot add new beneficiaries or cut vested interests. Provide written notice and include copies of the trusts; observe the 60‑day wait.
  • Court venue: Judicial modifications go to Superior Court, not the Clerk of Superior Court.
  • Payback considerations: First‑party special needs trusts and ABLE accounts may be subject to Medicaid recovery at death; weigh this in your plan.
  • Fiduciary duties: The trustee must act prudently, avoid self‑dealing, and document decisions tied to benefit protection.

Conclusion

ABLE accounts are a useful North Carolina tool to protect needs‑based benefits, but they shelter only a limited slice of trust sale proceeds. Use ABLE for the capped amount and pair it with a special needs trust—created by decanting or court‑approved modification—to hold the balance without jeopardizing eligibility. Next step: open the ABLE account and either deliver the decanting notice (60 days before the effective date) or file a petition in Superior Court to approve a special needs trust before distributing sale proceeds.

Talk to a Estate Planning Attorney

If you’re facing a trust home sale and need to preserve disability benefits, our firm has experienced attorneys who can help you understand your options and timelines. Call us today.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.

Category: Probate Q&A Series

Author: jpierce

Attorney Jared Pierce is the founder of Pierce Law Group in Raleigh, North Carolina, a firm he established with a dedicated focus on probate administration and estate planning across North Carolina. Born and raised in the Republic of South Africa, Jared moved to Durham with his family in 2001, bringing with him a rich cultural background and a distinctive accent that often serves as a conversation starter.