Is an ABLE Account the Same as a Special Needs Trust?
Individuals with disabilities often require government assistance programs like Supplemental Security Income and Medicaid due to substantial care costs exceeding $100,000 annually. Families must navigate these support systems carefully to maintain eligibility while improving quality of life for disabled loved ones.
How Special Needs Trusts Work
Two primary types of Special Needs Trusts exist:
Third-Party Trusts: Funded by parents or other family members, these trusts are exclusively for the disabled person’s needs. Upon the parents’ death, remaining funds pass to designated beneficiaries.
First-Party Trusts: Created using the disabled individual’s own funds or inheritance, these trusts shield income to preserve Medicaid eligibility, which has strict income and asset limits. All distributions require trustee approval, and Medicaid can reclaim remaining funds after the beneficiary’s death.
Limitations of Special Needs Trusts
Special Needs Trusts cannot pay for certain expenses covered by government programs, including groceries, Medicaid-covered medical expenses, and housing costs covered by Supplemental Security Income.
The ABLE Account Advantage
ABLE accounts function as tax-advantaged savings vehicles similar to 529 college savings plans. They cover expenses that enhance the beneficiary’s health, independence, or quality of life – including education, recreation, and personal technology.
Key constraints: Annual contributions are capped at $16,000 (2022 limit). Medicaid may reclaim ABLE account funds after the recipient’s death.
Strategic Integration
The most effective approach combines both tools: trustees can distribute SNT funds to ABLE accounts, allowing coverage of permitted expenses while maintaining government benefit eligibility. An estate planning attorney can help families develop comprehensive strategies for long-term financial security.
If you have a loved one with special needs and want to explore ABLE accounts or Special Needs Trusts, contact The Stegall Law Firm today to schedule a consultation.
