Robinson & Fulton Law

Estate Planning and Special Needs Attorneys

One California Street, Auburn, CA
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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

Special Needs Trust and the ABLE Act

October 12, 2016 By Margaret Fulton

Chances are that you have heard of a Special Needs Trust. What is a Special Needs Trust and why is it necessary? You may have also heard about the ABLE Act. Both the ABLE Act and special needs trusts are important tools in planning for the future of your special needs child.

Parents of a child with special needs, or other family members, can leave that child’s inheritance to the special needs trust instead of directly to the child. If your child will not able to work or live independently, he or she may need to remain eligible for “means-based” public benefits, such as SSI or Medi-Cal. The receipt of an inheritance by your disabled child might cause the child to lose eligibility for these vital benefits. A properly drafted special needs trust can hold assets for the benefit of a disabled person without those assets counting as the property of the disabled person. The assets of the special needs trust will supplement the public benefits the disabled person may be eligible to receive and will make it possible for the disabled person to have the same quality of life in the future.

Another new option for parents and special needs persons is to open an ABLE Account. The Achieving a Better Life Experience (ABLE) Act of 2014 allows people who have disabilities that began before they turned 26 to keep money in a special tax-advantaged account. The first $100,000 in an ABLE account does not count against the $2,000 Supplemental Security Income (SSI) resource limit, and none of the money in an ABLE account is counted for determining Medi-Cal eligibility. Each state is authorized to open its own ABLE account program, and California recently passed legislation to establish an ABLE program. However, the California program is not available yet and may not be ready for some time. The federal legislation does provide that you can open an ABLE account in another state. Ohio is the first state to establish this program and Tennessee has just opened an ABLE program. Both states allow contributions from residents of all states.

Article was written for Parents Resource Guide Summer 2016 and can be viewed at:  parents-resource-guide-summer-2016.

Filed Under: Estate Planning, Special Needs Planning Tagged With: ABLE Act, ABLE vs. Special Needs Trust, special needs trust

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