ABLE Accounts and SNTs How to Choose

What are they? ABLE Account SNT New tax-free savings tool for qualified individuals with disabilities Doesn’t affect eligibility for means-tested government benefits Similar to 529 College Savings Plan SNT Well-established planning tool that also protects eligibility for public programs Regulations governing them differ greatly Consider specific circumstances

Eligibility ABLE Account SNT Beneficiary satisfies Social Security definition of disability Onset of disability prior to age 26 Most programs open to residents from other states SNT Beneficiary satisfies Social Security definition of disability First Party SNT Funded with beneficiary’s assets Beneficiary must be under 65 when trust created Third Party SNT Funded with assets from anyone other than beneficiary No age limits

Establishing and Managing ABLE Assumes beneficiary has capacity to open and manage account If assistance needed, can be handled by parents, conservator/guardian, agent under POA SNT First Party SNT-Established by beneficiary, parents, grandparents, conservator/guardian or court Third Party SNT- Established by anyone except beneficiary Must be managed by designated trustee

Investments ABLE SNT Each state program designates investment options Changes may be made twice annually SNT Investments at sole discretion of trustee

Use of Funds ABLE Qualified Disability Expenses (QDEs) must contribute to health, independence or quality of life of beneficiary Basic living expenses, education, housing, employment training and support, health care, etc. Payment for housing without affecting SSI is major benefit Non-QDE distributions result in taxation of earnings portion of withdrawal, 10% penalty and possible state fine

Use of Funds SNT At trustee discretion, may pay for anything for sole benefit of beneficiary, other than food and housing, without affecting benefits. Food and housing expenditures are in-kind support (ISM) and will reduce SSI

Fees ABLE Nominal fees, generally for maintenance and charges by financial institutions SNT Attorney and trustee fees Pooled SNT combines resources of many sub- accounts and are less expensive

Taxes ABLE Earnings are federal income tax-free Contributions not tax-deductible for federal filings Contributions qualify for federal annual gift tax exclusion Tax savings unlikely to be significant for person on SSI or Medicaid and possible state fine

Taxes SNT First party trust Third party trust Generally a grantor trust, with income taxable to beneficiary and often below taxable limits Third party trust Proper drafting can minimize taxes

Medicaid Payback ABLE On beneficiary’s death, state Medicaid has option to require payback for medical and waiver services performed since account opened Source of contributions makes no difference

Medicaid Payback SNT First Party Trust - On beneficiary’s death, state Medicaid must require payback for services throughout beneficiary’s life Third Party Trust – No Medicaid payback

Which to Choose? ABLE particularly useful for: Saving beneficiary’s unspent work earnings or SSI Small inheritance Child support or alimony payments Paying for housing expenses Small litigation settlements Consult special needs attorney to assess specific circumstances One or both tools may be appropriate