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If you have a family member who\u2019s disabled, financial and estate planning can be tricky. You don\u2019t want to jeopardize his or her eligibility for means-tested government benefits such as Medicaid or Supplemental Security Income (SSI). A special needs trust (SNT) is one option to consider. Another is to open a Section 529A account, also referred to as an ABLE account, because it was created by the Achieving a Better Life Experience (ABLE) Act.<\/p>\n
ABLE account details<\/strong><\/p>\n The ABLE Act allows family members and others to make nondeductible cash contributions to a qualified beneficiary\u2019s ABLE account, with total annual contributions limited to the federal gift tax annual exclusion amount ($16,000 for 2022). To qualify, a beneficiary must have become blind or disabled before age 26.<\/p>\n The account grows tax-free, and earnings may be withdrawn tax-free provided they\u2019re used to pay \u201cqualified disability expenses.\u201d These include health care, education, housing, transportation, employment training, assistive technology, personal support services, financial management and legal expenses.<\/p>\n An ABLE account generally won\u2019t affect the beneficiary\u2019s eligibility for Medicaid and SSI \u2014 which limits a recipient\u2019s \u201ccountable assets\u201d to just $2,000 \u2014 with a couple of exceptions. First, distributions from an ABLE account used to pay housing expenses are countable assets. Second, if an ABLE account\u2019s balance grows beyond $100,000, the beneficiary\u2019s eligibility for SSI is suspended until the balance is brought below that threshold.<\/p>\n ABLE account vs. SNT<\/strong><\/p>\n Here\u2019s a quick overview of the relative advantages and disadvantages of ABLE accounts and SNTs:<\/p>\n Availability.<\/strong> Anyone can establish an SNT, but ABLE accounts are available only if your home state offers them, or contracts with another state to make them available. Also, as previously noted, ABLE account beneficiaries must have become blind or disabled before age 26. There\u2019s no age limit for SNTs.<\/p>\n Qualified expenses.<\/strong> ABLE accounts may be used to pay only specified types of expenses. SNTs may be used for any expenses the government doesn\u2019t pay for, including \u201cquality-of-life\u201d expenses, such as travel, recreation, hobbies and entertainment.<\/p>\n Tax treatment.<\/strong> An ABLE account\u2019s earnings and qualified distributions are tax-free. An SNT\u2019s earnings are taxable.<\/p>\n Contribution limits.<\/strong> Annual contributions to ABLE accounts currently are limited to $16,000, and total contributions are effectively limited to $100,000 to avoid suspension of SSI benefits. There are no limits on contributions to SNTs, although contributions that exceed $16,000 per year may be subject to gift tax.<\/p>\n Investments.<\/strong> Contributions to ABLE accounts are limited to cash, and the beneficiary (or his or her representative) may direct the investment of the account funds twice a year. With an SNT, you can contribute a variety of assets, including cash, stock or real estate. And the trustee \u2014 preferably an experienced professional fiduciary \u2014 has complete flexibility to direct the trust\u2019s investments.<\/p>\n Medicaid reimbursement.<\/strong> If an ABLE account beneficiary dies before the account assets have been depleted, the balance must be used to reimburse the government for any Medicaid benefits the beneficiary received after the account was established. There\u2019s also a reimbursement requirement for SNTs. With either an ABLE account or an SNT, any remaining assets are distributed according to the terms of the account or the SNT.<\/p>\n Examine the differences<\/strong><\/p>\n When considering which option is best for your family, remember the key differences: An ABLE account may offer greater tax advantages, while an SNT may offer greater flexibility. We can help your family decide how to proceed to best provide for your loved one.<\/p>\n \u00a9 2022<\/em><\/p>\n <\/body> If you have a family member who\u2019s disabled, financial and estate planning can be tricky. You don\u2019t want to jeopardize his or her eligibility for means-tested government benefits such as Medicaid or Supplemental Security Income (SSI). A special needs trust (SNT) is one option to consider. Another is to open a Section 529A account, also […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,9,10],"tags":[8,11,12],"class_list":["post-16439","post","type-post","status-publish","format-standard","hentry","category-articles","category-estates","category-news","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16439","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=16439"}],"version-history":[{"count":1,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16439\/revisions"}],"predecessor-version":[{"id":16440,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16439\/revisions\/16440"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=16439"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=16439"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=16439"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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