You mentioned that a disabled person may benefit from creating a supplemental needs trust (“SNT”) in addition to having an ABLE account. Can you explain more about SNTs?

In addition to opening an ABLE (achieving a better life experience) account, a person with disabilities may want to create a SNT. Both SNTs and ABLE accounts allow people with disabilities to save money without affecting their eligibility for public benefits such as SSI. An individual may choose to open one or the other, or both, depending on the amount of money they have and the anticipation of future funds from earnings or inheritance.

There are two main types of SNTs. A first-party trust is self-funded by the beneficiary of the trust. To create a first-party SNT, the beneficiary must be younger than 65 years old. New funds may not be deposited into this SNT after the beneficiary turns 65. A third-party trust is funded by someone else, such as a parent or grandparent. There are no limits to the amount that can be contributed into either of these per year, and there is no limit to the total asset balances in the trust.

Because the trust owns the assets, the beneficiary can remain eligible for benefit programs that have an asset limit, such as SSI. A trustee will be designated to control the assets in the trust and oversee the management and disbursement of its funds. SNTs allow the beneficiary to use the funds for expenses not paid for by public benefits. Such expenses can include clothes, entertainment, educational and recreational expenses, and transportation. SNTs may not be used for everyday expenses such as groceries.

While SNTs do not have contribution or balance limits as ABLE accounts do, they have more complicated rules for what the funds can be used for, they can be expensive to set up and complicated to manage. ABLE accounts are easier to set up and manage, but there are limits on the amount of money you can contribute each year and limits on the overall balance. A qualifying individual does not need to choose between the two accounts. An SNT can be established for purchases and expenses not covered by public benefits, and an ABLE account can be set up for basic cost of living expenses and everyday expenses.

Author: Britt Burner, Esq.