Able Account or Special Needs Trust: How to Decide?
It may be beneficial to have both types of accounts
ABLE accounts are less expensive to establish than an SNT, but their Medicaid payback requirement may be an important consideration if parents have other heirs they wish to receive remaining assets upon the beneficiary’s death.
In some cases, it may be beneficial to have both an ABLE account and a SNT. Beneficiaries wishing to “spend down” assets below SSI’s (Supplemental Security Income) $2,000 limit could place those funds in an ABLE account for easy access, while larger amounts could be allocated to a SNT.
In June of 2015, the IRS issued proposed regulations that many advocacy organizations criticized as too administratively burdensome. In response, the government has announced interim guidelines addressing some of those concerns. In addition to simplified reporting requirements, the IRS has indicated that if an ABLE beneficiary overcomes their disability, beginning on the first day of the next tax year, no contributions may be accepted to the ABLE account, although it remains otherwise intact. If the individual’s eligibility is subsequently reinstated, additional contributions may be accepted.
Questions still remain
Final IRS regulations, are pending, and a number of important concerns remain unaddressed. Even with the Social Security Administration’s recent publication of specific POMS, some questions and policy details remain. For instance, when someone is unable to establish an ABLE account on their own, the federal guidelines indicate that the only persons who may do so on their behalf are their agent under a power of attorney, a legal guardian or parent. This may be overly restrictive and could leave some individuals without recourse. If questions such as this are not laid to rest by the final regulations, it may fall to the courts to determine answers.
Scott C. Suzuki, Esq., is president of the Special Needs Alliance, SNA, a national nonprofit comprised of attorneys who assist individuals with disabilities, their families and the professionals who serve them.