USING AN ABLE ACCOUNT ALONG WITH A SPECIAL NEEDS TRUST – A HANDY DUO

Oklahoma implemented the ABLE Act (https://okstable.org/) in May, 2018 (see my blog post).  Because of the many positive benefits of an ABLE Account, establishing an ABLE Account by for the benefit of a person with disabilities is often a wise and practical solution to meeting some of the needs of a disabled person even if a Special Needs Trust (SNT) already exists for the same beneficiary.  The reasons for having both are often rather compelling:

If the disabled beneficiary has sufficient cognitive ability to self-advocate or manage a debit card, then funds can be distributed from the SNT to the ABLE Account.  Thereafter, qualifying distributions (“Qualified Disability Expenses” or QDEs) can be made from an ABLE Account to or for the use of the beneficiary, and such distributions are not treated as “income” to the beneficiary which, were they otherwise treated as income, may have reduced or caused a loss of SSI and/or Medicaid.

The list of permitted disbursements (i.e., that don’t count as income to the beneficiary) from an ABLE Account tends to be a longer and broader list than permitted distributions from an SNT.

     The time required of a professional trustee can be reduced if the trust that is professionally managed can make a disbursement to an ABLE Account established for the same beneficiary, particularly if the beneficiary can manage disbursements from the ABLE Account himself, or with some assistance from a family member or friend.  

However, due to the annual contribution limit for ABLE Accounts being equivalent to the annual gift tax exclusion under IRS Code Section 2503 of Title 26 (currently $15,000 per year), the disbursements from the SNT to the ABLE Account will not eliminate using the SNT for larger expenses of the disabled beneficiary.

Even a first party SNT is permitted to make distributions to an ABLE Account established for the same beneficiary as the SNT. 

An ABLE Account won’t always eliminate the need for an SNT, but it can sometimes serve a very useful role along with the SNT. 

Curtis J. Shacklett, Esq.

Barber & Bartz, P.C.

525 S. Main St., Ste. 800

Tulsa, OK 74103-4511

Telephone: (918) 599-7755

Facsimile: (918) 599-7756

Email: cshacklett@barberbartz.com

Website: www.barberbartz.com