Special Needs Trusts & ABLE Accounts

The Packard Law Firm Cares Deeply for the Special Needs Community

With her own daughter with significant disabilities, Alison Packard devotes most of her practice to helping families with loved ones with special needs. She genuinely cares for her clients and understands their worries more than most lawyers can. With this passion as her driving force, she has become a true expert on these issues which are critical for protecting your loved one with special needs.

Government Programs for Individuals with Special Needs

The United States government offers a number of programs that are designed to help care for individuals with special needs, including:

  • Supplemental Security Income (SSI): a needs-based income-assistance program for disabled people in low-income families
  • Social Security Disability Income (SSDI): an income-assistance program for a disabled individual with a sufficient past work record or for a disabled child of a parent with a sufficient work record if that parent is now dead, disabled or retired and the disabled child’s disability began before the age of 22
  • Medicaid: a health insurance program for low-income families and individuals with disabilities​
  • Medicare: a health insurance program available to disabled individuals after being qualified for SSDI for 24 months​
  • Section 8 Housing: federal housing assistance program for the disabled

While government programs are helpful for individuals with special needs, you may wish to provide more for your loved ones than basic government benefits. However, needs-based programs have income and asset limitations that may disqualify your loved ones from receiving any government benefits. Fortunately, there are legal options that allow you to provide security for your loved ones with special needs while ensuring that they retain invaluable government benefits.

Give More to Your Loved One with a Special Needs Trust

One way to give more money and resources to an individual with special needs without jeopardizing their eligibility for SSI or Medicaid is to create a special needs or supplemental needs trust. A special needs trust is a trust designed to provide management of assets for the benefit of an individual with disabilities. A properly-drafted and properly-administered special needs trust is considered an “excluded resource” for public benefits determination, which means the individual with disabilities can have a supplemental source of funds without jeopardizing eligibility for needs-based government programs.

There are many different kinds of trusts, but the three main types of SNT’s are (1) Third-Party Special Needs Trusts, (2) First-Party Special Needs Trusts and (3) Pooled Special Needs Trusts.

Third-Party Special Needs Trusts

A third-party special needs trust (SNT) is the most common type of trust used to benefit a person with disabilities. As stated in the name, a third-party trust is established by a third party, or someone other than the beneficiary, and holds assets that do not belong to the beneficiary. Typically, a third-party SNT is established by a family member to leave property through his or her estate plan for the beneficiary, but the person creating or giving money to the trust does not have to be related to the beneficiary.

A third-party SNT can pay for supplemental expenses not covered by SSI or Medicaid. For example, a trustee can distribute trust funds to pay for clothing, dental care, education expenses, a vacation, or hobbies. However, it cannot pay for food or shelter expenses, which are covered by SSI. A life insurance policy, retirement or investment account can name a third-party SNT as a beneficiary. A third-party trust can also be created in a Last Will and Testament.

Requirements for third-party SNTs are as follows:

  • The beneficiary must be disabled;
  • The trust must be created and funded by someone other than the beneficiary; and
  • The funds must be used for the sole benefit of the beneficiary while he or she is living

As shown, there are few additional eligibility requirements or limitations. There is no age limit for the onset of disability for third-party SNTs, no monetary limit that a third-party SNT can hold, and no limit to the number of trusts that may be created for a beneficiary. All of these things make third-party SNTs advantageous.

First-Party Special Needs Trusts

While third-party trusts are funded by a person(s) other than the beneficiary, a first-party special needs trust, sometimes referred to as a self-settled or d4a trust, holds property that belongs to the beneficiary (such as court awards or inheritances). Owning property outright jeopardizes a beneficiary’s eligibility for government benefits. Thus, to protect these benefits, this property can be held in a first-party SNT, where funds are excluded as countable income for SSI and Medicaid.

Some situations where a first-party special needs trust may be appropriate include:

  • Lawsuit settlement
  • Divorce settlement/child support payments
  • An inheritance or life-insurance proceeds

Requirements for first-party SNTs are as follows:

  • The beneficiary must be disabled;
  • The beneficiary must be under age 65 at the time the trust is established;
  • The trust must be established by a parent, grandparent, guardian or the court. Then the beneficiary's own assets are used to fund the trust;
  • The trust funds are used for the sole benefit of the disabled beneficiary; and
  • At the beneficiary's death, the state Medicaid agency must be reimbursed from any remaining assets in the trust fund.

Pooled Special Needs Trusts

A master pooled trust is a unique type of special needs trust (first-party or third-party) that combines resources from many individuals to form a “pool” of sub-accounts that are managed collectively by a trustee from a non-profit organization. This option is much more affordable than non-pooled first or third-party SNTs, but it is less individualized to the needs of the beneficiary.

ABLE Accounts

An ABLE account is a tax-advantaged savings account for an individual who was disabled before the age of 26. The “Stephen Beck Jr., Achieving a Better Life Experience Act of 2014” allows for contributions up to $15,000 per year (2020 IRS tables) into an account to be used for “qualified disability expenses.” Like a first-party special needs trust, a properly-established and properly-managed ABLE Account may be excluded as a resource for public benefits determination, but has a Medicaid payback upon the death of the beneficiary. Unlike a special needs trust, an ABLE account has no requirement of trustee management.

We Want to Help Your Loves Ones With Special Needs Have the Life They Deserve

To Alison Packard, this is more than simply giving someone more money. This is about giving a vulnerable group of people the life they deserve. Special needs trusts and ABLE accounts are vehicles to provide your loved ones with special needs a full life with opportunities to pursue the activities they enjoy. Call us today at  210-340-8877 to learn more.


Want to learn more? Check out these Frequently Asked Questions.