Podcast Episode Details

Working Together: ABLE Accounts & Special Needs Trusts with Matt Syverson

Episode 483

The definition of synergy is two things put together, having an effect greater than the sum of the parts. 

Synergy can play a beneficial role in family finances. A case in point is an ABLE account working together with a special needs trust for a person with disabilities. Matt Syverson joins us today to talk about it.

Matt Syverson is Managing Partner & Senior Wealth Advisor for Sound Stewardship in Overland Park, Kansas. He is also a Certified Financial Planner (CFP®) and a Certified Kingdom Advisor (CKA®). 

What is an ABLE Account?

An ABLE account, short for “Achieving a Better Life Experience,” is a tax-advantaged savings account specifically designed for individuals with disabilities. It allows them to save money and work without losing access to crucial government benefits like Supplemental Security Income (SSI) and Medicaid, which have strict asset limits of $2,000 for individuals and $3,000 for couples. The key features of an ABLE account include:

• Eligibility: Available to those who are blind or disabled before age 26 (rising to 46 in 2026).
• Savings Opportunity: Allows individuals to work and save without exceeding government asset limits.
• Tax Benefits: Often provides state tax deductions similar to 529 college savings plans.
• Contribution Limits: The lifetime maximum contribution limit aligns with 529 plans but should stay under $100,000 to avoid affecting SSI or Medicaid.
• Qualified Expenses: Can be used for day-to-day needs like food and rent, excluding vices like alcohol or gambling.
• No Impact on Government Benefits: ABLE account balances won’t disqualify the individual from receiving SSI or Medicaid.

It’s important to note that in most states, there is a Medicaid payback provision, which allows the state to recover funds from the ABLE account to cover medical bills after the account holder's passing. However, some states, including Kansas, have removed this clawback provision, making these accounts even more attractive for families.

What is a Special Needs Trust?

A special needs trust (SNT) is a more established tool designed to protect individuals' eligibility for government benefits while allowing families to manage significant assets. This trust can hold homes, vehicles, real estate, investments, and various accounts like IRAs or Roth IRAs. Key benefits of a special needs trust include:

• Asset Management: Can hold a wide variety of assets that would otherwise disqualify someone from receiving government benefits.
• Estate Planning Certainty: Spells out how the assets will be managed and distributed after the individual’s passing.
• No Medicaid Clawback: Unlike ABLE accounts, SNTs are not subject to Medicaid payback provisions, providing greater long-term financial security.
• Spending Flexibility: Can cover a wide range of expenses not covered by government programs.

However, special needs trusts come with a downside. If the trust is used to pay for food or rent, the SSI benefit will be reduced by $334 per month. Additionally, any direct payments to the individual from the trust can affect SSI income, so careful management is required.

How Can ABLE Accounts and Special Needs Trusts Work Together?

Combining an ABLE account with a special needs trust can offer significant advantages for families. The ABLE account can be used for day-to-day expenses, while the special needs trust can be preserved for larger, long-term financial goals. This separation allows for greater flexibility and financial independence.

• Day-to-Day Needs: An ABLE account can cover immediate expenses like food

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  Published on 1 year, 3 months ago