Estate planning for individuals with disabilities involves unique considerations, particularly regarding public benefits like Medicaid and SSI. Two tools in this landscape are ABLE (Achieving a Better Life Experience) accounts and supplemental needs trusts (SNTs). Understanding these options, and their implications, especially during Medicaid estate recovery, is key to effective special needs planning.
ABLE Accounts: Flexible Savings for Disability-Related Expenses
ABLE accounts, established under the ABLE Act of 2014, allow individuals with disabilities to save money in a tax-advantaged account. These accounts are designed to not jeopardize eligibility for public assistance programs.
Eligibility and Contribution Rules
Eligibility for an ABLE account requires that the individual’s disability onset occurred before age 26 (though it will be raised to 46 in 2026). Contributions to ABLE accounts are subject to annual limits, and while growth is tax-free, there is a cap on the total balance, which varies by state.
Advantages and Uses
ABLE accounts can be used for a wide range of disability-related expenses, providing both flexibility and independence. Most importantly, the funds in ABLE accounts typically don’t count towards the $2,000 asset limit for Medicaid eligibility.
Supplemental Needs Trusts: Securing Long-Term Financial Support
SNTs are created to support individuals with disabilities, ensuring they receive financial support without losing eligibility for benefits like Medicaid and SSI.
First-Person Trusts
First-person trusts are funded with the beneficiary’s own assets, like settlements or personal savings. The individual must be under 65 years old to establish this trust.
That’s the good news, but here’s the bad news: Upon the death of the beneficiary, the remaining assets in this trust are subject to Medicaid’s estate recovery to reimburse the state for care costs.
Third-Person Trusts
These trusts are established with assets from another person, such as a family member. They are not subject to Medicaid estate recovery, meaning that any remaining funds can be allocated to other family members or charities after the beneficiary’s death.
Strategic Planning for Financial Security
Considering both ABLE accounts and SNTs is key in planning for individuals with disabilities. ABLE accounts offer a user-friendly option with certain limitations, while third-person SNTs provide more comprehensive, long-term financial protection without the threat of estate recovery.
Putting It All Together
ABLE accounts and supplemental needs trusts play pivotal roles in financial planning for individuals with disabilities. They ensure that beneficiaries can receive financial support while maintaining eligibility for essential benefits.
It’s important to navigate these options with the assistance of an estate planning attorney who can help you make the right choices.
Schedule a Consultation!
To set up a consultation at our Oklahoma City estate planning office, call us at 405-843-6100. We also have a location in Tulsa, and the number there is 918-615-2700. If you would prefer to send us a message, fill out our contact form and we will get back in touch with you promptly.
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
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