Able Trust Pool Accounts for Special Needs Planning

Able trust pool accounts are a crucial tool for special needs planning, providing a way to save and manage funds for individuals with disabilities. These accounts are designed to help families plan for their loved ones' financial future.

By setting up an able trust pool account, you can save up to $12,000 per year, tax-free, and use the funds to pay for qualified expenses. This can be a huge relief for families who may not have the financial resources to cover these costs.

One of the benefits of able trust pool accounts is that they can be used to pay for a wide range of qualified expenses, including education, housing, and medical care. This can help ensure that individuals with disabilities have access to the resources they need to live fulfilling lives.

Able trust pool accounts are also a great way to avoid Medicaid spend-down, which can be a major concern for families who rely on government assistance. By saving funds in an able trust pool account, you can preserve your loved one's eligibility for Medicaid and other benefits.

ABLE Accounts are a type of savings account designed for individuals with disabilities.

These accounts allow individuals with disabilities to save up to $15,000 without affecting their eligibility for government benefits.

You can set up an ABLE account in your state or through a financial institution.

ABLE accounts are a great way to save for disability-related expenses, such as medical expenses, education, and employment training.

Contributions to an ABLE account are made with after-tax dollars, but earnings grow tax-free.

You can contribute up to the annual gift tax exclusion amount to an ABLE account each year.

ABLE accounts can be used to pay for qualified disability expenses, including housing, transportation, and personal support items.

To be eligible to open an ABLE account, individuals must meet two requirements: their disability must have been present before age 26, and one of the following must be true.

As of 2022, the age requirement will increase to 46 for individuals who meet the ABLE AGE ADJUSTMENT legislation, which will take effect in 2026.

If you're considering opening an ABLE account, it's essential to understand the eligibility criteria to ensure a smooth process.

A person with a disability does not need to provide proof of eligibility when opening an ABLE account. However, it's recommended to save a record of the diagnosis, benefits verification letter, and other relevant documents for future reference.

To set up an ABLE account, the person with a disability is usually the one establishing it. Alternatively, another person can establish and control the account for a beneficiary who is a minor child or an individual who is incapable of managing the account.

The person with signature or signing authority must be one of the following: an individual selected by the eligible disabled person, a legal guardian, a conservator, an agent acting under a financial power of attorney, a spouse, a parent, a stepparent, a sibling, a grandparent, or a representative payee for the eligible disabled person appointed by the Social Security Administration.

Here are the possible individuals who can set up an ABLE account:

Contributions to an ABLE account can come from various sources, including the account owner and their family and friends. The maximum annual contribution to an ABLE account is $15,000 in 2021, and this limit will increase when the federal annual gift exemption increases.

Employed account owners can contribute above the $15,000 annual limit, but only up to an amount equal to their gross income, which cannot exceed $12,760 in 2021. This means that if Lucas earns $16,500, he can contribute an additional $12,760 to his ABLE account.

However, if an employer has contributed to a 414(i) defined contribution plan, 403(b) annuity contract, or 457(b) eligible deferred compensation plan on the employee's behalf, the employee cannot contribute an added amount from their earnings to their ABLE account.

Individuals can make recurring contributions to an ABLE account, which are deposits of a specific amount made automatically into the account on a regular basis. For example, parents can set up a recurring contribution of $200 each month into their child's ABLE account.

The following individuals can make tax-deductible contributions to an ABLE account: the account owner, spouse, Montana resident child or stepchild, parent, step-parent, grandparent, and sibling of the account owner. However, these contributions are only deductible at the state level, not at the federal level, and the deduction is limited to $3,000 annually.

Here are the individuals who can receive a state tax deduction for up to $3,000 annually of the amount contributed to the ABLE account:

The first $100,000 in an ABLE account is exempt from the SSI resource limit eligibility test, but if the account balance goes over $100,000, the SSI of the beneficiary becomes suspended. However, this suspension has no effect on the ABLE account owner's eligibility for medical assistance through the Medicaid program.

The disability must have occurred earlier than age 26, making this a crucial factor in determining eligibility for an ABLE account.

Only one account per disabled person is permitted, so it's essential to carefully consider who will manage the account and make financial decisions.

Contributions to an ABLE account are not deductible for income tax purposes, but the income is tax-free when used for qualified disability expenditures.

The annual limit on contributions by anyone for one person is the amount of the annual gift tax exclusion, which is $14,000 for 2015.

If an ABLE account exceeds $100,000, the beneficiary would be suspended from eligibility for SSI benefits and no longer receive that monthly income, but they would continue to be eligible for Medicaid.

The first $100,000 held in an ABLE account would be exempted from the SSI $2,000 individual resource limit, providing some flexibility for account holders.

You can use the money in your ABLE account for any Qualified disability expenses. This can include education, employment training and support, and assistive technology and personal support services.

Employment training and support can be a game-changer for individuals with disabilities, helping them develop new skills and increase their earning potential.

Assistive technology and personal support services can also be used to help individuals with disabilities live independently and participate fully in their communities.

Medicaid payback is a crucial consideration when it comes to Special Needs Trusts (SNTs). Unfortunately, any amounts Medicaid has paid after the creation of the ABLE account will be repayable to Medicaid after death.

The Third Party SNT has no payback, making it a superior vehicle for protecting assets. This type of trust is funded by someone other than the beneficiary, and no Medicaid payback is required after death.

Here are the main differences between First-Party SNTs and Third-Party SNTs:

Accounts and Special Needs Trusts/Pooled Income Trusts are essential tools for individuals with disabilities and their families. They can help supplement public assistance benefits without disqualifying them from programs like SSI or Medicaid.

A Special Needs Trust (SNT) is a well-established method for protecting assets for the benefit of individuals with disabilities. It's designed to supplement, not replace, public assistance benefits.

There are three key types of SNTs: First-Party SNTs, Third-Party SNTs, and Pooled Trusts. First-Party SNTs are funded by the beneficiary's assets and require Medicaid payback after death. Third-Party SNTs are funded by someone other than the beneficiary and don't require Medicaid payback.

Pooled Trusts, managed by nonprofits, are ideal for those with smaller estates. They offer a cost-effective way to create a trust without the need for a separate trustee.

ABLE accounts offer tax-free growth on savings for disability-related expenses and provide the beneficiary with more direct control. However, they have contribution limits and are not as flexible as SNTs.

The choice between an SNT and an ABLE account depends on individual circumstances. For some families, using both tools in a complementary way may be the most effective approach.

Here's a comparison of the two:

A Special Needs Planning attorney can help identify the best type of account and SNT for an individual's situation and ensure that it's properly constructed to prevent benefits from being lost.

Medicaid Payback is a critical consideration when planning for the financial future of individuals with disabilities.

Medicaid will require repayment of any amounts paid after the creation of an ABLE account, which can be a significant burden on the estate.

ABLE accounts come with restrictions and may not be available for all persons with disabilities.

The good news is that a Third Party Special Needs Trust (SNT) has no payback requirement, making it a superior vehicle for estate planning.

This means that the assets in a Third Party SNT are not subject to Medicaid's repayment requirements, providing greater peace of mind for families.