Saving for the Future of Your Family Member with Special Needs: The ABLE Account and Special Needs Trust

 September 10, 2015
Posted by M&LAdmin4

Thursday September 10, 2015

As parents of children with special needs, we spend a fair amount of time worrying and wondering about how we can ensure that our children have successful, happy and productive futures. At M&L, as parents of children with special needs as well as professionals in the financial planning field, we are 100% confident when we say that the first step to a successful future for your child with disability is to start saving for that future, as soon as possible.

There are a number of different financial tools and strategies that we can recommend to families now that can help them achieve financial success in the future. Today, we would like to discuss two of these financial tools – the ABLE Account, and the Special Needs Trust (SNT). Although both the ABLE and the SNT are designed to act as tax-free savings vehicles for individuals with special needs, each of these vehicles have certain pros and cons that might ensure that one is a better fit for your needs than the other. Please read on to learn more.

ABLE Account & Special Needs Trust: What are they?

We have covered both the ABLE Act/Account and the Special Needs Trust (SNT) in many different blog posts over the years. If you would like to read about these two tools in greater detail, please click here to access the ABLE archive, and here to access the SNT archive. For today’s purposes, however, we have just included a brief description of each:

The ABLE (Achieving a Better Life Experience) Act is a piece of legislation that allows individuals with disabilities to open special savings accounts for disability-related expenses. This legislation, which builds on the already existing 529 college savings accounts, ensures that all funds in this account can grow tax free as long as the funds are used for qualifying expenses such as education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention, and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial expenses, and any other expenses approved under regulations.

Essentially, the Special Needs Trust (SNT) – which is established by placing funds and other assets under the control of a trustee – is a legal document that is designed solely for the financial protection of an individual with a disability. As mentioned, until the ABLE Act became law it was the only legal way to save money without sacrificing eligibility for government benefits. It is also important to note that the funds in the special needs trust supplement but do not supplant government benefits. In other words, the special needs trust is designed to provide financial assistance for any care above and beyond what the government provides.

ABLE Account vs. Special Needs Trust

As written in a great article in EP Parent, the major differences between the ABLE and the SNT can be found in the following categories:

Who May Have One: Any individual with special needs may establish a special needs trust, however only individuals that have a disability which occurred before the age of 26 are eligible for ABLE accounts – and re-eligibility must be determined every year. While there are no limits to the amount of special needs trusts that a person may have, ABLE accounts are restricted to one per qualified individual.

Government Benefits: Both the ABLE and the SNT protect an individuals eligibility for government benefits – however there is a cap on the ABLE account. If the balance of the ABLE account exceeds $100,000 a person will temporarily lose benefits until the balance falls below $100,000. As well, the first party and the pooled special needs trust also have a payback provision. Only the third party special needs trust does not have a Medicaid payback provision. All ABLE accounts have a payback provision; meaning Medicaid funds must be paid back from remaining funds in the account after the beneficiary has passed. Note: To learn more about the different types of SNTs please click here.

Establishing the account/trust: The SNT requires the advice and guidance of financial and legal professionals that have experience working with individuals with special needs. The person establishing the trust names the terms (how it will work, who will manage, funded, etc.), and it will be necessary to pay fees to the company that maintains the trust. The ABLE account will be opened according to the regulations in the state in which you live – states are currently writing these regulations

Funding an account/trust: There are no limits on resources or assets that can be placed in SNTs. The ABLE account, however, has a yearly contribution limit of 14,000 (subject to adjustment annually). There will also be a maximum balance limit, to be determined by each state. For more information on funding the SNT/ABLE, please see the EP Parent article as referenced above, or click here.

Withdrawals: SNT’s can be used for current and long term needs, while the ABLE account funds are more likely to be used for current needs. Trustees for the trust beneficiary may withdraw funds from the SNT; funds from the ABLE may be withdrawn by the account owner/beneficiary. For the SNT, qualified withdrawals are personalized and can be written to include or exclude specific expenses (within the confines of the law). The ABLE account eligible expenses are still in the process of being defined, however according to the National Down Syndrome Society, “A “qualified disability expense” means any expense related to the designated beneficiary as a result of living a life with disabilities. These include education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services and other expenses which will be further described in regulations to be developed in 2015 by the Treasury Department.” The SNT does not include housing as a qualified expense.

Naming Contingent Beneficiaries: One of more people/charities/institutions may be named as beneficiary, unless the SNT has a payback provision. The ABLE account has a payback provision, and contingent beneficiaries may be named after any required Medicare payback.

When should each be used?

As professional financial planners, we understand that each family has unique challenges that they face, and resources specific to their financial circumstances. Not only do we understand this, we pride ourselves on being able to helping families with special needs plan for their financial future regardless of their financial circumstances. Ideally, families with special needs should utilize both the SNT and the ABLE account to ensure that they are maximizing government tax breaks for the future. If this is not possible, careful consideration (and perhaps the opinion of a financial planner) should be given to both ABLE and SNT to see which is the best fit. And, it is vitally important to remember that if you choose to create a SNT you must consult with a professional that has experience with SNTs, otherwise you may run the risk to rendering your child ineligible for government benefits.

Would you Like More Information?

Thanks for taking the time to visit our website and read our blog today. If you would like more information on how to successfully plan for the future financial health of your family with special needs, please contact us! We would love to answer any questions you may have. If you would like to read more about ABLE vs. SNT, please click here to access a blog post on this topic we published a few months ago, or check out the article ABLE Accounts and Special Needs Trusts: A Side-by-Side Review, as published in EP Magazine (

As well, you may wish to check out our Services page for a comprehensive guide to our services, and how we can help your family with special needs. We also host a number of different workshops throughout the year designed to help families with special needs learn the essentials of financial planning for individuals with special needs. To learn more about these workshops, please click here. Our next scheduled workshop will take place November 10th, and will focus on helping families understand SSI/Medicaid & SSDI Medicare – follow the link to learn more, or to register.

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