Compare ABLE Accounts with Special Needs Trusts

ABLE
Account

First-party
Special Needs Trust

Third-party
Special Needs Trust

Governing authority

26 USC §529A (tax code)

42 USC §1396p(d)(4)

NY SSL§366

NY EPTL§7-1.12

NY EPTL§7-1.12

Payback
provision

Yes. State entitled to receive all ABLE balance at death of beneficiary up to amount of Medicaid provided

Yes. State named as remainder beneficiary to extent of Medicaid
provided

No

Beneficiary
eligibility

Individual
entitled to Social Security benefits (or otherwise disabled)
before age 26

Under
65 at time of trust creation and disabled by Social Security
definition

No
limits or requirements

Grantor/settlor

Any person (but beneficiary owns account)

Person with disability, parent,
grandparent, guardian or court

Anyone other than person with disability

Tax
issues

No
tax on earnings; distributions taxed unless used for “qualified
disability expenses”

Trust
earnings taxed to beneficiary under grantor trust rules; no
separate tax on distributions

Sometimes income taxable to person contributing money to the trust;
otherwise taxed at higher trust rates but
distributions to or for beneficiary may carry out income tax liability also possible Qualified Disability Trust.

Effect
of distributions on benefits

If
for “qualified disability expenses,” no effect on eligibility or benefit levels

Only distributions for food and shelter raise issues re: eligibility;
distributions directly to beneficiary general precluded

Distributions
to beneficiary may cause benefit reduction or loss, as may
distributions for food or shelter; other distributions have no
effect on most eligibility programs

Management
of assets

State program provider; account holder may choose state

Someone other than beneficiary; court often supervises

Someone
selected by settlor; often family members but sometimes professionals (with costs and bureaucracy)

Countable
resource?

Yes for SSI if balance exceeds $100,000

No

Maximum
contribution

Gift tax exemption amount
($14,000 in 2017/$15,000 in 2018) per year total, from any source

No limit

Limit
on number of accounts

1 per beneficiary

No limit