Many families with children with special needs have questions about ABLE Accounts and Special Needs Trusts (SNT), including:
- What are the similarities and differences between them?
- Should I set up an ABLE account, a SNT, or both?
- How will planning in this area help my child live a purposeful and impactful life?
There are many things to consider as you and your family plan for your child and the future. No two individuals with special needs are exactly alike. As such, no two special needs plans will be identical.
Here are EIGHT quick ways to compare ABLE Accounts with Special Needs Trusts that you may find helpful as you think through this important area of planning:
- Cost: ABLE accounts are relatively inexpensive to set-up. For example, in our home state of Indiana, “you can get started with as little as $25.” By contrast, setting up a SNT can cost $2,000-$5,000, or possibly even more.
- Taxes: ABLE accounts grow tax-free. Earnings on a SNT are taxed.
- Means-tested benefits: An ABLE account has no effect on means-tested benefits up to a limit of $100,000. A SNT has no effect on means-tested benefits.
- Uses: ABLE account funds must be used for qualified disability expenses such as “expenses related to education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services and other expenses.” SNT funds can be spent more broadly.
- Account ownership: An ABLE account is set up and owned by the beneficiary of the account (i.e., the individual with special needs). A SNT is owned by a family member, not the beneficiary.
- Accessing funds: ABLE accounts may provide frequent disbursements. SNTs are a long term investment.
- Remaining balances: Upon the death of the beneficiary, funds remaining in an ABLE account may go to paying back Medicaid. Similar funds remaining in a SNT go to the estate and/or probate.
- Age eligibility: “The ABLE Act limits eligibility to individuals with significant disabilities with an age of onset of disability before turning 26 years of age.” There are no restrictions on age of onset or type of disability for SNTs.
At the end of the day, it’s important to remember that the main purpose of special needs planning is to enable your child to live a GREAT life– today, tomorrow, and every day in the future. ABLE accounts and Special Needs Trusts are tools that may help you achieve this goal.
HAVE YOU OPENED UP AN ABLE ACCOUNT FOR YOUR SON OR DAUGHTER WITH SPECIAL NEEDS? IF SO, WHAT DO YOU THINK OF IT SO FAR?
IF NOT, WHY NOT? WHAT QUESTIONS OR CONCERNS DO YOU HAVE ABOUT ABLE ACCOUNTS?
SHARE YOUR REACTIONS AND COMMENTS IN THE “LEAVE A REPLY” SECTION BELOW AND WE’LL ATTEMPT TO ADDRESS THEM IN FUTURE POSTS!
Disclosure: The content of this blog post is provided for informational purposes only. It is not intended to be investment advice.