Planning for the financial future of a loved one with special needs is crucial. Two essential tools in special needs planning are ABLE accounts and Special Needs Trusts (SNTs). Understanding how each works, their benefits for your special needs child, and their differences will help you make the right choice for your family in La Jolla.
What Is an ABLE Account?
An Achieving a Better Life Experience (ABLE) account is a valuable tool for people with disabilities. According to Special Needs Answers, individuals can save up to $18,000 annually starting in 2024 without losing means-tested benefits. ABLE account holders can save up to $100,000 tax-free and spend the funds on disability-related expenses, such as assistive technology, transportation, education, and even leisure activities. These accounts are managed at the state level, and eligibility will expand to include those disabled before age 46 by 2026. One of the key benefits of ABLE accounts is that individuals can open and manage them independently, providing more financial autonomy than a Special Needs Trust.
What Is a Special Needs Trust?
A Special Needs Trust (SNT) is a legal document that allocates funds for a disabled loved one without affecting their eligibility for Medicaid or SSI. An SNT can cover expenses not provided by government benefits, including therapy, medical care, recreation, and travel. However, there are limitations. SNTs generally cannot be used for essentials like food and shelter without impacting benefits, nor can they cover cash payments or gift cards. Unlike ABLE accounts, SNTs require a trustee to manage the funds, ensuring the trust’s value is maximized with the help of special needs planners.
What Are the Differences?
The main differences between ABLE accounts and Special Needs Trusts lie in their contribution limits and management. ABLE accounts have a cap of $18,000 annually and a total savings limit of $100,000, while SNTs have no set contribution or savings limits but are subject to tighter controls. ABLE accounts allow the individual to manage their funds, whereas SNTs require a trustee to oversee the finances. Additionally, ABLE accounts are currently only available to those disabled before age 26, whereas SNTs have no age restrictions. SNTs are ideal for long-term asset management, while ABLE accounts offer more immediate flexibility.
How Should Families Choose?
Choosing between an ABLE account and a Special Needs Trust depends on your family’s goals and needs. If you’re looking for a quick, easy, and flexible way to save for a loved one’s disability-related expenses, an ABLE account might be ideal. However, a Special Needs Trust is better for long-term planning with no savings limits. Request a copy of The Special Needs Freedom Guide for answers to more of your questions.
Take Action: Start Your Special Needs Planning Today
La Jolla Estate Planning Attorney Amy Hsiao guides special needs families with compassion and efficiency to protect your loved one’s financial future. Amy can help you decide which savings tools best fit your family’s needs and guide you through the planning process. Schedule a call with Hsiao Law today to start planning for your loved one’s secure future.
Key Takeaways
- ABLE Account: Offers flexibility and direct control for individuals, with a $100,000 savings limit.
- Special Needs Trust: Provides greater flexibility and long-term security but requires a trustee for oversight.
- Planning is a Must: Determine whether an ABLE Account or SNT better fits your situation, but start planning now to protect your loved one.
- Plan Ahead: Work with an estate planning attorney to decide which tool is best for your family.