Because many people with disabilities require substantial care and support, it is essential to plan for their financial and other needs carefully. Special needs trusts and ABLE accounts are two tools that you can utilize.
What are these tools and how do they differ?
What is a special needs trust?
A special needs trust is a type of trust that either a person with disabilities or a parent or other caregiver funds to provide for the needs of the person with disabilities. Some people use special needs trusts to ensure a person with disabilities does not have too much income to qualify for Medicaid.
What is an ABLE account?
An ABLE account is a savings account with tax advantages that people with disabilities can use to cover qualified disability expenses that help maintain or improve their independence, health or quality of life. Examples of eligible expenses include communication devices, computers, education, support services, basic housing expenses and food.
How do special needs trusts and ABLE accounts differ?
Individuals cannot use the funds from special needs trusts to pay for basic expenses that government programs cover, such as food, housing or medical expenses. Individuals can use the money in ABLE accounts to cover these expenses.
The trustee of a special needs trust may transfer assets from a special needs trust to an ABLE account so that the person with disabilities can use those funds to pay for basic needs.
When utilized together, a special needs trust and ABLE account can help a person with disabilities protect their eligibility for government programs while still meeting their financial needs.
