We have prepared a handout to assist beneficiaries of Supplemental Security Income and other public benefits programs to determine whether they're better off using ABLE accounts or special needs trusts, or both.
Both ABLE accounts and SNTs permit the beneficiary to maintain eligibility for public benefits programs will being the beneficiary of funds held in reserve, but both also have their advantages and drawbacks. Here are a few of them:
ABLE accounts are easy to set up and can be managed by the beneficiary just like any other bank account she may have. Funds transferred into it and money spent from it will not affect eligibility for public benefits.
The two main drawbacks of ABLE accounts are their limitations on funding and on who may use them. In terms of funding, only $15,000 may be contributed to the account from all sources each year and its total value may never exceed $100,000. A bigger restriction is that only those who became disabled before age 26 are eligible to use ABLE accounts.
Special Needs Trusts
SNTs are somewhat more complicated to set up and administer than ABLE accounts, but they are also much more flexible. There are no limits on how much they may hold, how much they may distribute (but confirm that the distributions themselves don't run afoul of any relevant public benefits programs), or the age of the beneficiary. The beneficiary may not be the trustee of the SNT. Depending on the situation, this may take away the beneficiary's autonomy or provide much-needed oversight and assistance.
Using Both, Especially for SSI Beneficiaries
SSI has not changed its $2,000 limitation on assets for decades. Its rule that for any receipt of income, the beneficiary must lose the same amount of monthly benefit also makes it difficult for third parties, whether trusts or individuals, to assist SSI beneficiaries. They often must jump through some strange hoops to provide assistance without running afoul of the SSI rules. On top of this, payment for food or housing on behalf of a beneficiary is considered in-kind income up to a third of the SSI benefit. In other words, under this rule, if a third party provides housing for the beneficiary (for instance, he lives with his parents) or pays his rent, he loses a third of his monthly SSI payment.
ABLE accounts provide a vital pressure release valve for these rules. A third party or SNT can transfer funds on a monthly basis (for instance, $1,000 a month) into the ABLE account that the beneficiary can manage for his own personal expenses or to pay his rent without affecting his SSI benefit, just so these payments don't exceed $15,000 a year. In addition, if an SSI beneficiary receives funds from any source, he can transfer up to $15,000 into an ABLE account and will only lose his SSI benefits for the month during which he received the larger amount.
Our handout is meant as a resource for anyone considering whether to set up an ABLE account or create an SNT. Feel free to download it here and pass it along to anyone who might find it useful.