How is an ABLE account different from a Special Needs Trust or a Pooled Trust?
ABLE accounts, Special Needs Trusts (SNTs), and Pooled Trusts are all financial tools that can help people with disabilities to save money. The best option depends on your situation and goals. An ABLE account won’t replace a Special Needs Trust or a Pooled Trust. Read on for an outline of some key differences and see if an ABLE account is right for your family.
ABLE Account:
Expenses: There are fewer expenses than setting up a trust.
Ownership: The beneficiary owns the funds and can access them for eligible expenses.
Eligibility: Limited to people diagnosed with a disability before the age of 26 (the age of onset for disability will be raised to 46 starting January 1, 2026).
Taxation: Earnings from ABLE accounts are tax-free.
Contributions: There’s an annual contribution limit ($19,000), and a lifetime maximum of $400,000.
Flexible Spending: Funds can be used for a wide range of expenses, including basic living costs, education, and employment without affecting benefits.
Medicaid Payback: Medicaid in Oregon is restricted from filing a claim for a payback on funds that were previously in an ABLE account of a deceased beneficiary. However, Medicaid Payback is governed at the federal level, and out of an abundance of caution, there is always the possibility that funds could be recovered by Medicaid.
Fees: Low fees.
Special Needs Trust or Pooled Trust:
Expenses/Fees: Attorney and trustee fees are incurred when creating and maintaining an SNT.
Ownership: The beneficiary must get approval of the trustee to receive disbursement.
Eligibility: Less age-restrictive than ABLE accounts.
Taxation: SNTs face a substantial tax rate for trusts earning more than a certain amount annually.
Contributions: There are no contribution limits.
Spending: Usually used to pay for "extra" expenses that are not covered by public benefits. Funds can be used for housing, but benefits will be affected.
Medicaid Payback: Funds are not generally subject to a Medicaid recovery upon the death of the individual with disabilities.
Pooled Trust Considerations: Nonprofit organizations administer pooled SNTs, which combine the resources of many sub-accounts. The grantor does not have control over how assets are invested and used once placed in a pooled trust.
