Understanding ABLE Accounts, Special Needs Trusts and Pooled Trusts

ABLE Account

• If you have never received Medicaid services since opening the ABLE account, or if you do not plan to receive services in the future, Medicaid payback does not apply to you.
• a) If there is a concern with Medicaid payback, and Medicaid services were received since opening the ABLE account, when the ABLE account owner passes away the following expenses may be paid from the account: outstanding qualified disability expenses, including funeral and burial expenses. The remaining balance, if any, is limited to the Medicaid expenses paid after opening the ABLE account minus any Medicaid Buy-In premiums paid under any State Medicaid Plan; it is subject to federal and state probate laws. Any remaining funds are payable to the Estate or to a successor designated beneficiary if one was appointed before the death of the original account owner. Many ABLE plans have taken steps to limit Medicaid payback for their state residents. The Medicaid payback policy is posted for each ABLE plan in the comparison tools.

Special Needs Trust) or Pooled Trust

• Medicaid payback will vary depending upon whether you have a first-party or a third-party trust and whether it is a special needs or pooled trust. With some, but not all, there is a payback rule. Some may allow for funeral and burial expenses to be paid while others do not. Consult with your attorney for specifics concerning your trust. SSI beneficiaries must remember that there is a savings limit for burial expenses outside of a trust or an ABLE account.
• A third-party trust has no Medicaid payback upon early termination or upon death because the beneficiary never owned the assets of the trust.
• A first-party special needs trust has a Medicaid payback upon early termination or upon death for every dollar of Medicaid used during his or her lifetime.
• A pooled trust has a Medicaid payback for early termination of the account, or upon death of the beneficiary for and Medicaid used during the lifetime of the beneficiary, of any remaining assets that are “not retained by the nonprofit.” These rules vary from state to state.

If Medicaid payback is a non-issue for you, review this decision guide for other factors and review the ABLE Account, Special Needs and Pooled Trust Comparison Chart to determine whether an ABLE account, a special needs trust or a pooled trust—or whether all three—meet your needs.