Family members or friends with someone who has special needs may feel a desire to provide them with financial assistance. However, if the person with special needs is on SSI, Medicaid, or other need-based government programs, that assistance, unless properly structured, could reduce, or even eliminate, a special needs individual’s benefits.

SSI, or Supplemental Security Income, is a federal, need-based program for disabled individuals. SSI has strict income and asset limits for beneficiaries. Financial, or even in-kind, gifts to an individual cause a dollar-for-dollar decrease in their monthly benefits. A large enough gift could even cause individuals to lose eligibility for SSI and other need-based benefits altogether. The asset limit for SSI eligibility in 2019 is a mere $2,000.

There are ways to make gifts to people with special needs without endangering their benefits. Broadly speaking, two of the methods available are special needs trusts and ABLE accounts.

Both special needs trusts and ABLE accounts are structures that allow a person with special needs to acquire some financial assets without losing eligibility for government benefits.

The advantages of ABLE accounts include tax exemptions, similar to those of 529 educational savings accounts, on income generated and fewer restrictions on how the money can be used compared to a special needs trust. The disadvantages of ABLE accounts include restrictions on the overall size and yearly donations to the account and the restriction that an individual with special needs can only have one ABLE account.

Special needs trusts do not have a restriction on how much money the trust can collect and hold, but special needs trusts have stricter restrictions on how the money can be used to benefit the person with special needs.

If a person with special needs already has an ABLE account or special needs trust, that person’s relatives and friends should take care make sure that their planned gifts go to the trust or ABLE account and not the person directly. People should also make sure that an ABLE account will remain under the yearly donation and overall size limits before a donation is made.

Whether or not a special needs trust and/or an ABLE account is the best fit for a person’s needs is something that should be discussed with an experienced special needs attorney. Due to the restrictions on how money from a special needs trust can be used, a special needs trust should only be drafted by an attorney who has previous experience with special needs trusts.

To determine what is the best method of supporting a relative or friend with special needs, please call Martha C. Brown & Associates at (314) 962-0186.