Planning for loved ones with special needs can be very complicated. Families want the best for them and want to be able to make their lives as comfortable as possible.  They want to preserve their assets; but if not structured properly, they can actually disqualify the beneficiary from Federal and state aid programs, including SSI and Medicaid.

​

The primary solution – establishing a (third-party) supplemental needs trust – can help preserve their eligibility for government benefits, but there can be considerable costs associated with the legal fees, administrative expenses, and potentially unfavorable tax treatment.

​

What is an ABLE account?

​

529A savings accounts, authorized by Congress in December 2014 under the ABLE Act, are modeled after 529 college savings plans and is a tax-advantaged account intended to be used to meet the needs of individuals with disabilities.  States are just starting to offer ABLE accounts.

​

Who qualifies for a 529A account?

​

To qualify for an ABLE account, a person must have become blind or disabled by the time they reach the age of 26.

​

What are the Contribution Limits?

​

Contributions to 529A plans must be made in cash.  Unlike 529 college savings plans, total contributions in a single year to a 529 ABLE account (from any and all sources combined) are limited to $14,000.   The first $100,000 in the account generally will not be considered when determining eligibility for means-tested Federal and state aid.

​

What can I use the Account for?

​

ABLE accounts are owned by the individual, who has direct access to the funds. Money from 529A accounts can be used for expenses such as health care, transportation, and education without jeopardizing government benefits.

​

Comparing 529 ABLE Accounts to Third-Party Supplemental Needs Trusts

​

529 ABLE accounts are similar to Supplemental Needs Trusts (SNTs); specifically "self-settled" SNTs that can be used to supplement the needs of a disabled beneficiary without disqualifying the beneficiary from Medicaid and that is also subject to state Medicaid payback provisions after the death of the disabled beneficiary.

​

What are the drawbacks to the 529A accounts?

​

We've already discussed the requirements of qualifying for the trust as well as the Medicaid payback provision.  Of course, for families who wish to fund larger dollar amounts on behalf of a disabled beneficiary (i.e. more than $100,000), the 529A plan simply will not be practical.  Also, families that expect there will be remaining money in the account will most likely not want to use a 529A plan if the beneficiary is receiving benefits from Medicaid due to the payback provision. 

​

The biggest current "drawback" to the 529A Account is simply due to the fact that no states [or perhaps by the time you've read this, very few states will] have yet actually created any Qualified ABLE Programs, as it will take some time for the Treasury and IRS to issue regulations and guidance, and states to decide whether to take action and separately create the new account type. 

​