Understanding ABLE Accounts, Special Needs Trusts and Pooled Trusts

Advantages

• Ease of start up
• Small initial deposit
• No need or limited need for attorney
• Person with the disability is the ABLE account owner
• Any person can contribute
• ABLE account owner decides when and how money will be used for qualified disability expenses
• Distributions to pay for food or housing costs are not counted as income in SSI program; housing costs must be paid in the month funds are withdrawn from ABLE
• May be closed at any time or moved to another ABLE plan

Disadvantages

• Requires disability onset prior to age 26
• $17,000 annual limit on combined contributions
• Medicaid payback provision in some states

Advantages

• Can be established by the person with a disability with his/her own funds or by a parent, grandparent, legal guardian (or conservator) or a court
• Must have a disability, but no disability onset requirement
• No limitation on deposits
• There can be more than one SNT account for the beneficiary

Disadvantages

• An attorney is needed or strongly recommended to draft documents
• Not a good choice for small amounts of money
• Deposits limited to beneficiary's funds
• Payments to providers must be requested and justified as reasonable and necessary
• All distributions must be approved by the trustee
• Medicaid payback required upon early termination or death of beneficiary

Advantages

• Any third party, but not the beneficiary, can contribute
• Beneficiary not required to meet strict SSI disability test
• No Medicaid payback required

Disadvantages

• An attorney is needed or strongly recommended to draft documents
• Not a good choice for small amounts of money
• Deposits limited to beneficiary's funds
• All distributions must be approved by the trustee
• Funds may not be readily available to the beneficiary
• Payments to providers must be requested and justified as reasonable and necessary

Advantages

• A more affordable option than establishing a separate, traditional SNT.
• The trust is managed by the nonprofit organization and removes concerns about finding a qualified trustee.
• Pooled trusts are managed by experts, which can sometimes mean greater efficiency. There may be lower administrative fees and the potential for greater growth because funds are pooled together for investment purposes.

Disadvantages

• A pooled trust is managed as a large trust made up of sub-accounts which means that management and investment decisions may not be tailored to the unique needs of beneficiaries in the way that a separate, traditional SNT would be.
• Payments to providers must be requested and justified as reasonable and necessary.
• Assets placed in a first-party PT are subject to a Medicaid lien upon death of funds not retained by the trust and may not be returned to the family after the death of the beneficiary. Instead, the trust uses the assets to reimburse the state for public benefits paid to the beneficiary during his or her lifetime. This varies from state to state and trust to trust.
• Depending upon the PT, there may be set-up fees, annual fees and other expenses.