ABLE Accounts and Special Needs Pooled Trusts

It’s vital for non-profits and human service providers that manage special needs pooled trusts to understand the role that ABLE (Achieving a Better Life Experience) accounts play in the overall financial planning picture.

While ABLE accounts now offer a new tax-advantaged savings plan for families caring for loved ones with disabilities and other special needs, trustees need not perceive ABLE accounts as competition to the special needs pooled trusts and services they offer.

ABLE accounts are often described as personal savings plans akin to 529b college savings plans. They can be set up quickly and easily, often without a lawyer. When Congress passed The ABLE Act in 2014, they never intended for these accounts to be run by institutions, such as human service providers, or non-profit organizations.

ABLE accounts were also never intended to be a replacement for any type of special needs trusts—pooled or otherwise. It’s not an either/or proposition. ABLE accounts and special needs pooled trusts co-exist, albeit with different advantages, and limitations. Families can and do set-up both types of vehicles within their caregiving plan.

When used appropriately, ABLE accounts and special needs pooled trusts pose solutions that address different kinds of special needs problems and challenges. In reality, they have different rules governing who qualifies, who can contribute, how much can be invested annually, how the funds can be used, among other stipulations.

But they share the same purpose, to preserve the personal wealth or income of disabled individuals AND in enabling the person to qualify for means-tested public benefits, such as Medicaid and SSI.

Provider Trust and ABLE Comparison Infographic

Failure to follow the rules governing ABLE accounts or special needs pooled trusts—such as the amount of money that can be deposited annually or the total allowable fund balance—could result in the beneficiary losing their government benefits until their fund is put back in compliance. And poor investment decisions could cause the fund’s value to decline or erode.

The more informed the public is as to the differences between ABLE accounts and special needs pooled trusts, the more likely it is that they will determine the right financial management solution for their unique, personal circumstances. And the more likely they are to avoid making costly financial or fiduciary mistakes with their love one’s precious assets.

It’s advantageous that special needs pooled trusts have qualified, knowledgeable trustees or managers at the helm. ABLE accounts, on the other hand, are often managed by family, friends or guardians who may not fully understand the ramifications their financial management decisions could have on the beneficiaries.

In subsequent blogs, we’ll be taking a closer look at the unique advantages, limitations, and potential pitfalls posed by ABLE accounts, as compared with special needs pooled trusts. Stay tuned!