Leah Mitchell: ABLE Accounts vs. Special Needs Trusts: Which is Better for Your Child With a Disability? (September 22, 2021)

Leah Mitchell, of Chambliss, Bahner & Stophel, P.C., has made available for download her article, “ABLE Accounts vs. Special Needs Trusts: Which is Better for Your Child With a Disability?”, published in JDSUPRA. The abstract is as follows:

Any parent of a child with a disability has likely heard of a “special needs trust.” As information has become more easily available online, a simple Google search for “special needs trust” is likely to garner hundreds of results. More recently, ABLE accounts have gained popularity as a common financial planning tool for individuals with disabilities. But what are the primary differences between a special needs trust and an ABLE account? Which is better for your child?

There are two main types of special needs trusts: a first-party “payback” special needs trust and a third-party special needs trust.

A first-party special needs trust is funded with assets that already belong to the person with a disability. Some examples are a bank account or Uniform Transfers to Minors Act (UTMA) account, assets gifted or inherited outright, and lawsuit settlement funds. Generally, a first-party trust may only be funded with assets of a person with a disability under age 65. When drafted properly, assets held in a first-party special needs trust do not count as assets of an individual for purposes of need-based disability benefits, such as SSI and Medicaid. However, this type of trust is also commonly referred to as a “payback trust” since the trust assets must be used to pay back the state for any Medicaid benefits the individual received during his/her lifetime.

Click here to view Leah Mitchell’s summary of “ABLE Accounts vs. Special Needs Trusts: Which is Better for Your Child With a Disability?”

Posted by Marin Larkin, Associate Editor, Wealth Strategies Journal.

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