ABLE Program & Special Needs Trusts

The Social Security Act covers the needs of retirees, individuals with disabilities and the elderly. The Supplemental Security Income program (SSI) is for those with disabilities.

Social Security Income & Medicaid

The SSI and Medicaid resource limit is $2,000; this excludes a home, car and a few other items. The small amount often results in individuals with disabilities living a life of poverty. Instead of spending down excess assets, this money can be used to fund a “special needs trust” (SNT).

A trust is a contract with certain terms and conditions, and there are many different types of trusts. An SNT can accept excess monies, and the funds in the SNT are not counted as assets against the $2,000 limit. Therefore, there is no disqualification from public benefits, and the funds can be used for all kinds of needs the individual with disabilities may have. An SNT provides that an individual with a disability or a third party such a family member, friend, or charitable source contributes money for the benefit of the person with the disability to supplement the beneficiary’s special needs.

When done correctly, the trust assets are not counted when eligibility determinations are made for public benefit programs. For example, a child for whom a trust has been established is eligible to apply for Supplemental Security Income and Medicaid at age eighteen, and both programs have a $2,000 asset limit for eligibility. If an SNT has been created and the individual applicant has more than $2,000 from earnings or gifts, the excess money can be placed in an SNT and eligibility problems are avoided.

There are two important downsides to the benefit of an SNT:



• The beneficiary is dependent on the trustee. The trustee legally owns the trust money

• The trustee is not forced to make any distributions.

For example, if a device is invented that would allow someone who cannot speak to speak using new technology, the SNT funds could pay for such a device. The SNT could also pay for the services of a home health worker to be available daily. The beneficiary may request these items, but the trustee can refuse the expenditures based on subjective assessment of the beneficiary’s needs and the available trust assets. The SNT gives no autonomy to the beneficiary to manage his or her own money, whether or not he or she has mental capacity. 

ABLE Programs

The newest feature in special needs planning is an “ABLE” account. ABLE stands for “Achieving a Better Life Experience”. An individual with a disability can have only one ABLE account. The difference between an ABLE account and an SNT is that there is no document establishing it.

An ABLE account is established online with a state agency which invests the funds and makes disbursements. The account does not have to be established in the state where the beneficiary lives. The account investment choices can be reviewed twice a year by the state to give permission to spend it and how the money is spent is reviewed by Social Security Administration.

There are no restrictions on who can give money to an ABLE account, but only a limit in donations not exceeding $14,000 in a calendar year. The $14,000 figure is also tied to the amount an individual can give away in a year without having to file a gift tax return. If the amount that can be given annually increase from $14,000, the ABLE rule will change as well. If the balance of an ABLE account exceeds $100,000, an SSI recipient’s benefits will be suspended, not terminated, until the balance falls below $100,000 again.

Planning for a person with special needs may involve either or both an SNT and an ABLE account. The two are not mutually exclusive. For example, someone who can work may want to get a job and put money into an ABLE account and save towards purchasing a car. That person may also have an SNT, funded with other people’s money, as a place for relatives to leave money when they die. One difference between the two is that if an SNT is funded by people other than the beneficiary (known as a “third party” SNT), Medicaid has no claim on the money when the beneficiary passes away. There is a Medicaid claim when the SNT was funded only with money that was owned by the beneficiary (a “first party” SNT). Unfortunately, an ABLE account will be liable to repay Medicaid when the beneficiary passes away regardless of who contributed the funds to the ABLE account over the years. 

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