Dive into ABLE accounts and special needs trusts

We frequently get asked by families whether an ABLE account or a special needs trust is best for them.  The short answer is a typical lawyer answer: it depends.  The medium answer is that they serve different purposes and its not a matter of choosing one or the other, its about choosing the best vehicle for specific purposes, and in the end, most families should have both an ABLE and a special needs trust.

They both serve as a place where money can be accumulated for a person with a disability without interfering with eligibility for SSI and Medicaid benefits. Past that commonality, there are significant differences.

Ownership

An ABLE account can be owned and even managed by the person with the disability, if they otherwise have the ability. The disabled individual can make his or her own decisions and use a debit card or checks to pay for items.

A special needs trust must be managed by a trustee, who makes all the decisions about investment and use of the money in the trust.  The person with the disability, or a guardian or caretaker, can propose expenditures from the trust, but the trustee makes the final decision and handles the purchase.

Holdings

An ABLE account has both yearly and lifetime deposit limits, at least for purposes of excluding assets from consideration for SSI and Medicaid eligibility. Up to $15,000 per year (approximate, this amount is tied to an index so will vary slightly year to year) may be deposited without impacting SSI or Medicaid eligibility.  A maximum of $100,000 total can be held in the ABLE account without impacting SSI or Medicaid eligibility.  The yearly deposit limit is far below what a person might typically receive from a parent upon the parent’s death, when property, retirement accounts and life insurance are all figured in.  An ABLE account can hold only cash, as well, so if a child is left property other than cash it could not be shielded by the ABLE account.  Money can be contributed by any person.

A special needs trust has no limit on the amount that can be contributed to it at any time, nor a maximum value overall.  A special needs trust can also hold any type of property, including a house, car, or other non-cash assets (with the exception of a pooled trust, which is not discussed in this article).  Like the ABLE account, money can be contributed by any person, but if the disabled person will be a contributor then the trust itself must have some special provisions.

Number of accounts

A person may have only one ABLE account.  It is not possible to get around the contribution limits by opening multiple accounts, as only one account is legal permitted.

A person may have any number of special needs trusts naming them as beneficiary.  Each parent and each individual grandparent could set up their own special needs trust for a person if they so chose, giving them the ability to choose the trustee and terms of their own liking.

Read more on ABLE accounts and special needs trusts:

ABLE Account Q&A,

4 Things to know about ABLE Accounts,

How NOT to use special needs trust money,

Does your child need a special needs trust to get Medicaid?,

The basics of special needs trusts

If you have questions about preparing for your own special needs child’s future, give us a call or shoot us an email. legal@parkercounsel.com or 833-733-2668