ABLE ACCOUNT, THIRD PARTY SPECIAL NEEDS TRUST AND POOLED TRUST: COMPARE

Posted on October 5, 2016 by

by
Thomas D. Begley, Jr., CELA

Below is a chart comparing an ABLE Account with a Third-Party Special Needs Trust.

	ABLE ACCOUNT	THIRD PARTY SPECIAL NEEDS TRUST OR POOLED TRUST
Onset of Disability	Qualifying disability exists prior to age 26	No requirement
Age of Beneficiary	No requirement	No requirement
Who May Establish	Beneficiary, parent, guardian, agent	Anyone except beneficiary
Number of Accounts	One per beneficiary	Unlimited
Fees	Financial institution fees	Attorney and trustee fees
Contribution Limits	$14,000 per year (federal gift tax limit); total capped at state limit for 529 college savings accounts; SSI payments suspended when assets total $100K	Unlimited
Investment Options	Investment strategies may be changed twice annually	No restrictions
Valid Distributions	Broadly defined “disability expenses,” including basic living expenses	Any expenses for sole benefit of beneficiary, with certain implications for distributions for food and/or shelter
Taxes	Earned income is tax-free	Can use a variety of planning strategies to minimize taxes that may be due. Proper drafting and advice will help to minimize tax concerns.
Medicaid Payback Upon Death of Beneficiary	Remaining funds must reimburse state for Medicaid benefits. This is a huge disadvantage for larger accounts.	No payback
Payments for Food or Shelter Reduce SSI	No	Yes