What is a Special Needs Trust?

People with disabilities have many needs beyond basic medical care, food, clothing and shelter. These needs (often called “special needs” or “supplemental needs”) include: recreation; transportation; dental care; computer, telephone and television services; hair and nail care; cost differentials in housing and shelter; supplemental nursing and attendant care; care management; and mobility assistive devices including electric wheel chairs.

Federal law allows a disabled person to retain their assets in two types of special needs trusts (often known as a “SNT”) and still qualify for Supplemental Security Income (“SSI”) or Medicaid benefits. One type of SNT is created for the sole benefit of the disabled person under the age of 65 by the individual’s parent, grandparent, legal guardian, or court. This is a “payback” SNT, as the Florida Medicaid agency will receive amounts remaining in the trust after the person’s death up to the amount paid under the Medicaid program for services to the individual. The other type of SNT is known as “pooled trust”, which is created and managed by a nonprofit organization. A disabled person enters into a joinder agreement for their separate sub-account to be maintained for them by the pooled trust. Distributions from SNT’s are made to third parties to provide for the special needs of the disabled person.

What is an ABLE account?

ABLE Accounts are tax‑advantaged savings accounts for individuals with disabilities and their families. The beneficiary of the account is the account owner, and income earned by the accounts will not be taxed. Contributions to the account, which can be made by any person, must be made using after‑tax dollars and will not be tax deductible for purposes of federal taxes.

Eligible individuals and their families will be allowed to establish ABLE savings accounts and still retain eligibility for SSI, Medicaid and other public benefits. The legislation states that an ABLE account will, with private savings, “secure funding for disability‑related expenses on behalf of designated beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance, Medicaid, SSI, the beneficiary’s employment and other sources.”

The ABLE Act limits eligibility to individuals with significant disabilities with an age of onset of disability before turning 26 years old. If you meet this age criteria and are also receiving benefits already under SSI and/or Social Security Disability Income (“SSDI”), you are automatically eligible to establish an ABLE account. If you are not a recipient of SSI and/or SSDI, but still meet the age of onset disability requirement, you could still be eligible to open an ABLE account if you meet Social Security’s definition and criteria regarding significant functional limitations and receive a letter of certification from a licensed physician. The total annual contributions by all participating individuals, including family and friends, for a single tax year is $15,000. An ABLE account requires a “payback”: after the death of the beneficiary the state of Florida may file a claim to all or a portion of the funds in the account equal to the amount the state of Florida spent on the beneficiary through its Medicaid program.

Please contact our office for any questions you have or for more information about SNT’s and ABLE accounts.