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Special Needs Trust vs ABLE Account

At Surprenant & Beneski, P.C., we specialize in providing estate planning services to clients throughout Southeastern Massachusetts. Among the crucial tools in our estate planning arsenal are Special Needs Trusts (SNTs) and ABLE accounts, each designed to enhance quality of life for individuals with disabilities without compromising their eligibility for essential government benefits. Understanding the nuances between these two options can help families make informed decisions about their financial planning.

What Is a Special Needs Trust?

A Special Needs Trust (SNT) is a legal arrangement that allows a person with disabilities to receive income without affecting their eligibility for public assistance benefits, such as MassHealth (Medicaid) or Supplemental Security Income (SSI). There are two types of SNTs: 

  1. First-Party Special Needs Trusts, funded with the beneficiary’s own assets (often from an inheritance, settlement, or personal savings).
  2. Third-Party Special Needs Trusts, established and funded by someone other than the beneficiary, typically a close family member.

A Special Needs Trust is designed to pay for expenses that government benefits do not cover, such as personal care attendants, out-of-pocket medical and dental expenses, education, travel, and recreation. It’s worth noting that the funds in an SNT must be managed by a trustee, not given directly to the beneficiary since this could affect the disabled party’s eligibility for benefits.

What Is an ABLE Account?

An ABLE account is a tax-advantaged savings account available to individuals who were diagnosed with significant disabilities before the age of 26. Created under the Achieving a Better Life Experience (ABLE) Act of 2014, these accounts allow eligible individuals and their families to save money without losing eligibility for certain public benefits. Like SNTs, ABLE accounts are meant to fund disability-related expenses that are not covered by public benefits, including education, housing, transportation, and healthcare.

ABLE accounts have annual contribution limits (linked to the federal gift tax exclusion) and may affect SSI benefits if the account exceeds certain thresholds. Keeping this limitation in mind, however, ABLE accounts provide the beneficiary with more autonomy since the individual can have the account in their own name and control the funds, provided those funds are spent on qualified disability expenses.

How Do The Purposes and Functions of SNTs and Able Accounts Differ?

While both Special Needs Trusts and ABLE accounts are designed to support individuals with disabilities without jeopardizing their government assistance, they serve somewhat distinct purposes and come with separate sets of rules.

An SNT is more flexible regarding the age of the beneficiary and the source of funds but requires a trustee to manage and distribute the funds. It has the advantage of holding unlimited assets, making it ideal for larger inheritances or settlements. It does not, however, provide the beneficiary with direct control over their money and can be more complex and costly to set up and maintain.

Conversely, an ABLE account offers the individual with disabilities more control and independence; if capable, they can manage their funds independently. Nonetheless, ABLE accounts have contribution and balance limits that SNTs do not, and are only available to those whose disability began before the age of 26. Though ABLE accounts are less expensive and simpler to establish than SNTs, they may not be suitable for those with assets that exceed the contribution limits or those who became disabled later in life.

Why You Need the Help of Our Skilled Attorneys 

Understanding, let alone navigating, the intricacies of Special Needs Trusts and ABLE accounts can lead to confusion and expensive mistakes. This is no do-it-yourself project. At Surprenant & Beneski, P.C., our estate planning attorneys have the in-depth knowledge and extensive experience to guide you through the process seamlessly and without stress.

Contact Our SNT/ABLE Account Attorneys Today

The legal team of Surprenant & Beneski has the skill set you need to determine whether a Special Needs Trust or ABLE account is best for your family. We will assist you in setting up the one you decide on and, if necessary, in selecting an appropriate trustee. We will make certain that you are in compliance with pertinent contribution and usage rules, and integrate the SNT or ABLE account into your broader estate plan. Contact us now for the efficient and compassionate help you need to protect and secure the future of your vulnerable loved one.