Question: I have a disabled daughter. I recently heard about an ABLE account that could be set up for her benefit. Is this something that I should explore?
Answer: As the parent of a child with special needs, there are several planning techniques that you can take advantage of to protect assets on behalf of your child. The establishment and use of an ABLE account is a relatively new vehicle that can be utilized. Before we explore the ABLE account, it is important to understand the different options available to you and your family.
When it comes to protecting assets for a disabled individual, Supplemental Needs Trusts (SNT) are commonly used. The SNT is a trust created to hold assets for the benefit of a disabled individual. Assets held in a properly drafted SNT can be used to enhance the quality of life for a person with disabilities without interfering with any government benefits that individual may be receiving or may be entitled to, such as Supplemental Security income (SSI) and/or benefits received through the Medicaid program. Generally speaking, there are two categories of Supplemental Needs Trust, a First-Party Supplemental Needs Trust and a Third-Party Supplemental Needs Trust.
A First-Party Supplemental Needs Trust (oftentimes referred to as a self-settled trust) protects assets which originally belong to the disabled individual (i.e. personal injury award, money in their personal bank account or an inheritance not properly protected). A Third-Party Supplemental Needs Trust is a trust funded for the benefit of the disabled person using the funds of someone other than him or herself (i.e. a gift from a grandparent or an inheritance properly protected). The main difference between the two trusts, other than the origination of funds, is the distribution of assets upon the death of the disabled person. A First-Party Supplemental Needs Trust must pay back any monies paid by Medicaid during the disabled person’s lifetime. A Third-Party Supplemental Needs Trust does not have to payback Medicaid.
Thanks to the Stephen Beck Jr. Achieving a Better Life Experience (ABLE) Act of 2014 persons with qualified disabilities, who became disabled prior to age 26, can create and fund an ABLE account. Monies deposited into the ABLE account, up to $15,000.00 per year with a maximum contribution of $100,000.00, provide spending and saving autonomy not previously provided to persons with disabilities receiving need-based benefits. ABLE accounts can be created and funded by family members, employers or the disabled person themselves. Typically, persons receiving SSI are held to strict asset limits and are penalized by approximately 1/3 of their benefits if their SSI or the funds in a SNT are used to pay for food or shelter. Alternatively, monies funded into an ABLE account can be used for food and shelter without a reduction in benefits. But, like a First-Party Supplemental Needs Trust, if there is any money left in the account at the time of the account holders’ death, there is a payback to Medicaid. An ABLE Account can be created by visiting
Incorporating an ABLE account into your planning for a loved one with special needs provides autonomy and flexibility not previously available.
- Robin Burner Daleo, Esq. and Nancy Burner, Esq.