If you have a child or loved one with a serious disability, providing for her future is of the utmost importance. ABLE accounts are growing in popularity as a way to preserve resources for people with special needs, but they are not a replacement for a special needs trust. Learning about how ABLE accounts and special needs trusts work will help you make a more informed decision about saving for your loved one’s future. 
About ABLE Accounts
In 2014, the Stephen Beck, Jr. Achieving a Better Life Experience (ABLE) Act gave states the authority to establish tax-advantaged savings programs for individuals with physical or mental disabilities. Virginia administers accounts under the “ABLEnow” name.
ABLE accounts can be opened for the benefit of individuals with disabilities that developed before the age of 26. A beneficiary can only be named for a single account, so multiple family members are not allowed to set up accounts to benefit the same individual.
ABLE accounts operate in a way that is very similar to the 529 educational savings accounts frequently used to provide for a child’s college education. Because of this, they are sometimes referred to as 529a accounts.
Funds in an ABLE account can only be used for a qualified disability expense (QDE). This may include:
- Basic living expenses
- Health and wellness
- Housing
- Financial management
- Transportation
- Education and training
- Assistive technology
- Legal fees
If money in an ABLE account is withdrawn for a purpose other than a QDE, the beneficiary will owe taxes on the investment earnings and incur a withdrawal penalty.
Key benefits of setting up an ABLE account for someone with a disability include:
- Allowing funds to grow tax-free
- Providing individuals who are able to do so an opportunity to control their own funds using the program’s debit card
- Giving individuals who are able to attempt working a chance to save their earnings without jeopardizing important government benefits
How ABLE Accounts Compare to Special Needs Trusts
ABLE accounts are relatively simple to create and administer, which is why they often attract the attention of individuals who are looking for way to provide for a loved one with a disability. However, special needs trusts offer some distinct advantages that must be taken into consideration:
There Is No Eligibility Requirement.
A special needs trust does not require the beneficiary to meet any specific disability requirements. This means, someone who can’t benefit from an ABLE account because they became disabled after age 26 can still benefit from a special needs trust.
There Is No Pay Back Provision.
The money left in an ABLE account when the beneficiary passes away must be used to pay back government benefits that have been received. A trust can be created to allow the unused funds to pass to other family members or desired beneficiaries.
There Are Unlimited Deposits.
Unlimited funds can be deposited into a trust, but an ABLE account has limits of $15,000 for deposits made by others and $12,140 in deposits that come from a disabled beneficiary’s earnings.
There Is Nothing That Affects Eligibility For Government Benefits.
Unlimited funds can be gifted to a third-party special needs trust without affecting eligibility for government benefits. With an ABLE account, a balance of over $100,000 will suspend any cash benefits that are being received.
There Can Be a Broader Use of Funds.
Terms for distributions vary depending on how a trust is set up, but the funds from a special needs trust can generally be spent more broadly than those in an ABLE account.
There Is Control Over Investment Decisions.
With an ABLEnow account in Virginia, you can only choose from four investment options with varying degrees of risk. A special needs trust gives you full control over how the money is invested.
Making the Right Choice for Your Disabled Loved One
In some cases, an ABLE account may be all that your special needs loved one requires. In other cases, a trust or a combination of both a special needs trust and an ABLE account may be the better choice.
Do You Have A Family Member Or Loved One Who Requires Special Needs Legal Planning?
If you are responsible for a family member or loved one who requires special needs legal planning you should speak with an experienced special needs planning attorney as soon as possible. Contact us online or call our Virginia Beach office directly at 757.490.3500 to schedule your free consultation. We have offices throughout Virginia including Chesapeake, Newport News, Norfolk and Suffolk.
