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Compare ABLE Accounts with Special Needs Trusts









The Achieving a Better Life Experience Act (the ABLE Act) became effective in New York State on April 1,2016. The purpose of the ABLE program is to assist individuals with disabilities with saving funds in accounts to better enhance their independence and quality of life. The program is intended to supplement, not supplant, government entitlements, such as Medicaid and SSI. Distributions from the account can be used to pay for qualified disability expenses, including education, housing, transportation, and health.





To learn more about ABLE accounts in New York State, go to https:www.mynyable.org/home.html.





The chart below provides a comparison between ABLE accounts and Special Needs Trusts.





Learn more about special needs trusts.





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Download Comparison Chart





 

ABLE
Account



First-party
Special Needs Trust



Third-party
Special Needs Trust




Governing authority



26 USC §529A (tax code)



42 USC §1396p(d)(4)


NY SSL§366


NY EPTL§7-1.12



NY EPTL§7-1.12



Payback
provision



Yes. State entitled to receive all ABLE balance at death of beneficiary up to amount of Medicaid provided



Yes. State named as remainder beneficiary to extent of Medicaid
provided



No



Beneficiary
eligibility



Individual
entitled to Social Security benefits (or otherwise disabled)
before age 26



Under
65 at time of trust creation and disabled by Social Security
definition



No
limits or requirements



Grantor/settlor



Any person (but beneficiary owns account)



Person with disability, parent,
grandparent, guardian or court



Anyone other than person with disability



Tax
issues



No
tax on earnings; distributions taxed unless used for “qualified
disability expenses”



Trust
earnings taxed to beneficiary under grantor trust rules; no
separate tax on distributions



Sometimes income taxable to person contributing money to the trust;
otherwise taxed at higher trust rates
but
distributions to or for beneficiary may carry out income tax liability also possible Qualified Disability Trust.



Effect
of distributions on benefits



If
for “qualified disability expenses,” no effect on eligibility or benefit levels



Only distributions for food and shelter raise issues re: eligibility;
distributions directly to beneficiary general precluded



Distributions
to beneficiary may cause benefit reduction or loss, as may
distributions for food or shelter; other distributions have no
effect on most eligibility programs



Management
of assets



State program provider; account holder may choose state



Someone other than beneficiary; court often supervises



Someone
selected by settlor; often family members but sometimes professionals (with costs and bureaucracy)



Countable
resource?



Yes for SSI if balance exceeds $100,000



No



Maximum
contribution



Gift tax exemption amount
($14,000 in 2017/$15,000 in 2018) per year total, from any source



No limit



Limit
on number of accounts



1 per beneficiary



No limit



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