Yes, you can have both a special needs trust (SNT) and an ABLE account. There are no restrictions on this. While the SNT and ABLE account are two different planning tools, they complement one another and can be very advantageous to those who qualify.
What is a Special Needs Trust (SNT)?
A special needs trust is a trust designed for beneficiaries who are disabled. Rather than giving money directly to your disabled loved one, the funds go into a trust for his/her benefit. Giving money (or leaving money at your death) directly to your disabled loved one could jeopardize his/her government-assisted benefits (such as Supplement Security income (SSI) or Medicaid). However, a special needs trust can help prevent that from happening.
You appoint someone to serve as trustee of the SNT. The trustee has complete discretion over the trust property and is in charge of spending money on your loved one’s behalf. Because your loved one has no control over the money, government programs like SSI or Medicaid will disregard the trust property for eligibility purposes. The trust usually ends when your loved one dies or all the trust funds have been spent.
It is very important that the SNT is created with the correct language so that it does not interrupt your loved one's government-assisted benefits. Online services may offer special needs trusts for low prices, but it is not recommended that you purchase these. The SNT should be specific to your needs and wishes and must follow state guidelines for eligibility. Rather, you should consult with a trained legal professional who can create the trust correctly and talk to you about the advantages and disadvantages of an SNT.
If I have a representative payee on my child's account, is this a special needs trust?
No, this is not a special needs trust. A representative payee is someone who manages the Social Security benefits of an individual who is incapable of handling his/her own benefits. Although the beneficiary does not have actual control over the account, the beneficiary is the owner - not the representative payee. Even if the title of the bank account would suggest otherwise, the ownership is titled to the beneficiary. Because it is not an SNT, these accounts will affect means-tested benefits. It is important to keep in mind that the funds in this type of account are counted as a resource for that beneficiary.
What is an ABLE Account?
ABLE accounts (which stands for Achieving a Better Life Experience) are intended to create tax-free savings accounts for individuals with disabilities. The goal of these accounts is to ease the financial strains faced by individuals with disabilities and their families. These accounts supplement, rather than replace, the benefits someone may already be receiving, such as through private insurance, Medicaid, or other sources.
Qualified applicants for an ABLE account include minors or adults who are blind or have been diagnosed with a severe physical or mental disability before age 26. The individual must also be entitled to Supplemental Security Income (SSI) through the Social Security Administration.
Previously, individuals were required to keep their resources under $2,000 to qualify for SSI and Medicaid. With the ABLE accounts, an individual can save up to $14,000 per year and up to $100,000 total in the account. Balances of $100,000 or less are excluded from your SSI resource limit. Only the amount over $100,000 is counted against your limit.
The earnings on ABLE investments are federally tax-deferred and tax-free if used for qualified disability expenses. Qualified disability expenses include any expense incurred as a result of living with a disability and that is intended to improve your quality of life. This would include things such as education, health and wellness, housing, transportation, legal fees, financial management, employment training and support, adaptive technology, personal support services, oversight and monitoring, and funeral and burial expenses.
You can open an ABLE account quickly and easily here. Just tell them a little bit about yourself and select your investments. You can easily access your account at any time, from a PC, tablet, or mobile device. Plus, you can get started with as little as $25.
If you think you or your loved one would benefit from a special needs trust, speak with one of our attorneys. They would be happy to help you create a trust that protects funds for your disabled loved one.
Source: ABLE National Resource Center
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