Robinson & Fulton Law

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Comparing an ABLE Account with a Third Party Special Needs Trust

March 22, 2017 By Margaret Fulton

There has been much discussion about the recent legislation involving the Achieving a Better Life Experience (ABLE) Act.  For a discussion of ABLE accounts, please scroll down to read about the ABLE Act.

ABLE accounts are an incredible resource for persons with a disability.  ABLE accounts are a great tool to use in conjunction with special needs trusts.  However, ABLE accounts are not always a replacement for special needs trusts.  Each person has his or her own individual needs and that person’s situation needs to be assessed to determine what will work best for the person with special needs and his or her family.

This chart is here to assist you in understanding the important differences between an ABLE account and a third party special needs trust.

You can view and print this chart here: ABLE Account compared with SNT (edited March 2017)

Issues ABLE Account Third Party Special Needs Trust
Who can use? Only persons disabled before age 26 Any person with a disability
Who can fund? Anyone, including person with a   disability

Anyone, including person with a  disability IF (s)he has capacity
(recent legislation in December 2016 allows this)

How many can person have? One Unlimited
Who can control? Person with a disability and likely their legal guardian, conservator, or agent Anyone except the person with a disability and their spouse
Who inherits on death of person with disability? Medi-Cal must be repaid for amounts  paid by Medi-Cal after the creation of the ABLE account; then can go to heirs Person with a disability’s heirs or whomever is named in document
How much can be funded in a year? $14,000 (or annual gift exemption) Unlimited
Is funding gift-tax free? Yes No, but no gift tax will be paid until the donor has given more than $5 million (indexed to inflation)
Is there a cap on how much can be in account? Yes, currently $100,000 limitation for   SSI recipients and up to State 529-plan limitations ($475,000 in CA) No
How is income taxed? No income tax Taxed as a non-grantor trust at highest marginal tax rate
What type of distributions can be made? Distributions can be made for “qualified disability expenses” such as housing transportation, assistive technology and more No limitation, except for certain disbursements, such as for housing, may reduce or eliminate SSI or Medi-Cal eligibility

Filed Under: Special Needs Planning Tagged With: ABLE SNT chart, ABLE vs. Special Needs Trust

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