Houston special needs trust attorney Whitney L. Thompson (https://www.wthompsonlaw.com/special-needs-trusts-and-able-accounts/) of The Law Office of Whitney L. Thompson, PLLC, sheds light on Special Needs Trusts (SNTs) and ABLE (Achieving a Better Life Experience) accounts for individuals with disabilities. These financial tools are designed to enhance the quality of life for disabled individuals without jeopardizing their eligibility for essential public assistance programs such as Medicaid and Supplemental Security Income (SSI).
Special Needs Trusts have long been a cornerstone in financial planning for families with disabled members. They allow for the accumulation of assets to support the unique needs of the beneficiary while maintaining eligibility for government benefits. Houston special needs trust attorney Whitney L. Thompson emphasizes that SNTs have no monetary limits, offering flexibility in funding. However, Thompson notes that they are more complex to establish and manage compared to other options.
The introduction of ABLE accounts through the ABLE Act of 2014 provides an alternative or complementary solution. These accounts enable individuals with disabilities to save money tax-free for disability-related expenses without affecting their eligibility for public benefits. The Houston special needs trust attorney points out that while ABLE accounts are easier to set up and manage, they come with contribution limits. The total annual contribution is capped at $16,000, and each state sets a maximum limit ranging from $235,000 to $500,000. Additionally, only one ABLE account is permissible per disabled individual.
Despite these differences, both SNTs and ABLE accounts share similarities. They are tax-advantaged savings vehicles designed to support individuals with disabilities without compromising their eligibility for public benefits. Funds in both accounts grow and distribute tax-free, and contributions can be made by the beneficiary, family, and friends. However, ABLE accounts offer a broader range of permissible expenses, known as Qualified Disability Expenses (QDEs), which include housing, transportation, education, employment training, health prevention and wellness, assistive technology, personal support services, financial management, legal fees, and more.
Attorney Thompson explains that families often establish both an ABLE account and a Special Needs Trust to maximize the benefits of each. An ABLE account can be used for everyday expenditures, while an SNT can cover larger purchases or expenses not permitted under ABLE account regulations. This dual approach allows for greater financial flexibility and helps ensure that the beneficiary's needs are comprehensively met.
There are different types of Special Needs Trusts to consider. A third-party special needs trust is established by someone other than the beneficiary, such as a parent or grandparent, and can receive contributions from multiple family members. A first-party special needs trust is funded with the beneficiary's own assets, often after receiving a substantial amount through inheritance or a lawsuit. Attorney Thompson advises that the choice between these trusts depends on individual circumstances and should be made in consultation with a qualified estate planning lawyer.
Accessing funds from these accounts also varies. Money in an ABLE account is easy to access and can be used for a wide range of expenses. In contrast, distributions from a Special Needs Trust are typically made at the discretion of the trustee and are intended to supplement, not replace, public benefits. This distinction underscores the importance of careful planning and management to adequately address the beneficiary's needs without compromising their eligibility for essential services.
Attorney Thompson emphasizes the importance of understanding the nuances of each financial tool. Thompson states, "Depending on your circumstances, you might use both financial products. However, only one ABLE account is permissible for each disabled individual." This highlights the need for personalized financial planning to effectively support individuals with disabilities.
For families managing the complex matters of financial planning for a loved one with disabilities, consulting with an experienced estate planning lawyer is crucial. Attorney Whitney L. Thompson and the team at The Law Office of Whitney L. Thompson, PLLC, are dedicated to helping families create tailored plans that protect the well-being and financial security of their loved ones.
Understanding the benefits and limitations of Special Needs Trusts and ABLE accounts is essential for making informed decisions. Leveraging these tools appropriately can allow families to provide meaningful support to individuals with disabilities, enhancing their quality of life while preserving access to vital public assistance programs.
About The Law Office of Whitney L. Thompson, PLLC:
The Law Office of Whitney L. Thompson, PLLC, based in Houston, Texas, focuses on estate planning, probate, and guardianship law. Attorney Whitney L. Thompson is committed to providing compassionate and knowledgeable legal services to families, particularly those with special needs members, helping ensure that their unique needs are met with personalized solutions.
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