Attorney At Law: ABLE accounts or SNTs — Which do you need?

By Britt Burner, Esq.

For disabled individuals, it can be difficult to navigate public benefits, especially when you have assets or income that exceed the allowable limits. Two commonly used vehicles to manage assets are Achieving a Better Life Experience (“ABLE”) accounts and Supplemental Needs Trusts (SNTs).

In September 2017, New York State passed a law authorizing ABLE accounts for disabled individuals in accordance with the federal law. ABLE accounts allow for money to be saved by someone receiving public benefits, such as SSI, without affecting eligibility.

To qualify for an ABLE account, the beneficiary must be diagnosed with a significant disability before age 26. Contributions can be made to the account by the beneficiary, friends, family members, or 529 college savings account rollover, but the total annual contribution cannot exceed a certain limit, which is pegged to the gift tax exemption. This amount is $18,000 in 2024 and is subject to change year by year. Employed beneficiaries may deposit an additional amount up to the Federal Poverty Line for a one-person household, but only if they are not contributing to a retirement savings account in that year. The 2024 Federal Poverty line amount is $14,580 in the continental US. 

However, ABLE account balances are limited. Under the SSI program, the first $100,000 in the account is disregarded as a resource. Any amount above that is counted as a resource. The SSI resource limit is $2,000. If you exceed this, SSI payments will stop until the resources are below the allowable limit. 

A disabled person may spend their ABLE account funds on “qualified disability expenses,” which are expenses and basic costs of living that are intended to maintain and improve their quality of life. These qualified expenses include but are not limited to education; health and wellness; groceries; housing; transportation; legal fees; assistive technology; personal support services; funeral/burial expenses, etc. 

Depending on the amount of money the recipient of benefits has and the anticipation of future funds, either from earnings or inheritance, it may be prudent to consider creating an SNT (supplemental needs trust) in addition to the ABLE account. 

Like the ABLE account, SNTs allow people with disabilities to save money without affecting their eligibility for public benefits such as SSI. There are two main types of SNTs. A first-party trust is self-funded by the beneficiary of the trust. To create a first-party SNT, the beneficiary must be younger than 65 years old. New funds may not be deposited into this SNT after the beneficiary turns 65. A third-party trust is funded by someone else, such as a parent or grandparent. There are no limits to the amount that can be contributed into either of these trusts per year, and there is no limit to the total asset balances in the trust. 

A trustee will be designated to control the assets in the trust and oversee the management and disbursement of its funds. SNTs allow the beneficiary to use the funds for expenses not paid for by public benefits. Such expenses can include clothes, entertainment, educational and recreational expenses, and transportation. SNTs may not be used for everyday expenses such as groceries. 

While SNTs do not have contribution or balance limits as ABLE accounts do, they have more complicated rules for what the funds can be used for. A qualifying individual does not need to choose between the two accounts. An SNT can be established for purchases and expenses not covered by public benefits, and an ABLE account can be set up for basic cost of living expenses and everyday expenses. 

Navigating the placement of funds while qualifying for government benefits can be complicated. However, with proper planning, the use of the funds can be maximized to the individual while also receiving the benefit of public assistance.

Britt Burner, Esq. is a Partner at Burner Prudenti Law, P.C. focusing her practice areas on Estate Planning and Elder Law. Burner Prudenti Law, P.C. serves clients from New York City to the east end of Long Island with offices located in East Setauket, Westhampton Beach, Manhattan and East Hampton.