CMP Financial Planning

How ABLE Accounts and SNTs Can Work Together


By Barry Jamieson

In presentations I have recently given to special needs families about Special Needs Trusts (SNTS) it is apparent that there is still confusion about when to establish an SNT and when to start an ABLE account. Specifically people want to know: “Should I set up an SNT or an ABLE account?” The main point of this article is that these two vehicles work towards the same purpose of maximizing future benefits for the individual with a disability. In many situations special needs families will want to avail themselves of both tools to enhance the quality of life of not only their loved one but of other family members as well.

Before determining how the two vehicles can work together, let’s recap what the features of ABLE accounts and SNTs are.

ABLE Accounts

ABLE accounts are savings accounts that grow tax free but don’t impact the individual’s eligibility for Medicaid and Social Security as long as certain rules are followed. The contribution limit is $15,000 per individual per year if the individual has no work earnings. If the individual has work earnings they will be able to save in 2018 an additional $12,060 (the federal poverty limit). Importantly, monies in the account after the individual dies will be used to pay back Medicaid for services rendered.

Special Needs Trusts

SNTs are legal agreements where assets are managed by a trustee according to the terms in the trust agreement. Trusts do not need to be funded initially. Similar to ABLE accounts, funds in the account are not counted as resources for Medicaid and Social Security purposes. Unlike ABLE accounts, withdrawals from SNTs for non-room and board expenses can trigger benefit reductions. SNT distributions are often used for “extras” such as entertainment, trips and out-of-pocket medical expenses. There are no contribution limits to an SNT. For first party SNTs, trusts are funded by the individual and remaining funds after the individual’s death are used to pay back the government. For third party wholly discretionary trusts, residual funds can be designated towards other beneficiaries named in the trust.

From this quick description of these two tools, it is clear that although similar in purpose, SNTs and ABLE accounts have unique advantages and disadvantages that when taken together and used strategically can compliment each other in a way that maximizes benefits to the individual and protects family assets. The table below shows the key advantages and weaknesses of both vehicles.

Account Type

             Assets Sheltered   Costs                         Flexible Withdrawals       Contrib. Limits      Asset Limits    Govt. Pay Back     Taxes


ABLE              YES                  MINIMAL                      YES                                       YES                        YES                          YES                       NO

SNTs               YES                   HIGHER                         NO                                       NONE                    NONE                   Depends              Possible


The key advantage of an ABLE account is flexibility. It is relatively easy to set up and takes minimal costs to maintain. As long as withdrawals are for the benefit of the individual, no penalties will be incurred. SNTs by contrast can be costly to set up and maintain. In addition, a trustee needs to be mindful how withdrawals may impact SSI benefits. However, a key advantage of third party SNTs is that funds can remain with the family. Another advantage of SNTs over ABLE accounts is that there are no limits on contributions or overall assets limits.

Utilizing features of both SNTs and ABLE accounts
In order to avoid paying back the State for Medicaid benefits, a third party SNT can be used to harbor long term assets. Short term savings can be kept in an ABLE account to provide a flexibility in how funds are used for the individual. ABLE accounts can be replenished with contributions coming from the individual’s work earnings, family members and even from the SNT (see related article). Since funds can move from an SNT to an ABLE account penalty free, the trustee of the SNT can use contributions to the ABLE account as a means of providing penalty free withdrawals from the SNT.
Both SNTs and ABLE accounts should be strongly considered by families as key savings and planning tools for individuals with disabilities. One tool need not be considered over the other. An effective planner can utilize both to maximize benefits for the individual with disabilities.