Special Needs Trusts and ABLE Accounts


Special needs trusts (SNTs) are instruments used to protect individuals with disabilities while expanding the resources available to provide diverse care options. SNTs are vital because these individual often rely on a combination of state and Federal benefits which have strict asset limits, such as Medicaid and Supplemental Security Income (SSI). Both programs have a $2,000 countable asset limit. If the individual were to acquire countable assets above that threshold, then those benefits would be suspended, which could be devastating due to healthcare and prescription costs. Common uses for the SNT include purchasing supplemental health insurance above and beyond Medicaid coverage, paying for vacations/field trips for the individual, purchasing personal property, and paying for caregivers, transportation, and service animals.

Achieving a Better Life Experience (ABLE) Accounts are similar to 529 plans in that funds are tax advantaged. The funds can be used for qualified disability expenses, including housing, while preserving the individual’s eligibility for state and Federal benefits. The beneficiary must be blind or disabled from a condition that began prior to age 26, so individuals who become disabled later in life cannot use ABLE Accounts. Up to $15,000 per year may be contributed to an ABLE Account in 2020, with a maximum total value of $500,000, though anything over $100,000 may cause a reduction in SSI benefits.

How do ABLE Accounts differ from special needs trusts?

Special needs trusts have no upper asset limit and no asset contribution limit per year. Expenditures can be made on a broader array of services than an ABLE account, including social outings, sporting events, clothing, and personal electronics. Both ABLE Accounts and d4A first party special needs trust require payback at death for Medicaid services, so neither should be used for funds passing by inheritance. Instead, family members wishing to provide for the individual should consider a third-party special needs trust, which does not require a payback at death.

Used properly, special needs trusts and ABLE Accounts are extraordinary resources to enhance the lives of individuals with disabilities.