Financial Planning

Trusts

It is important for individuals and families to ensure that any private funds do not jeopardize the person’s eligibility for public benefits such as Medicaid and Supplemental Security Income (SSI). A special needs trust can be a supplement to the person’s public benefits. A special needs trust is a legal vehicle that manages funds for the benefit of a person who needs some assistance in daily living.


By using a special needs trust, families can provide on-going support to an individual with a developmental disability even after the parents or caregivers have passed away. Medicaid and SSI also have limits on how much a person may earn and in how much he or she may have in assets. If a person goes over those income or asset limits, he or she may lose those benefits and vital services may stop.

A trustee manages assets placed in the trust in accordance with the trust document.

Types of Trusts:

  • Support Trusts - provides for the support, care, and maintenance of the beneficiary. DOES NOT preserve eligibility for Government benefits: Medicaid, SSI
  • Third Party Trusts – Established and funded with assets of a third party, who can be a family member, provides for amenities only. For example: recreational activities, home furnishings, haircuts… do not preserve government benefits as long as it is properly written.
  • Pay Back Trusts – established by a family member or individual with trust powers. Funded by the beneficiary’s funds, for example, a lawsuit. This trust provides for amenities or extra items, preserves government benefits. Requires language in the trust that upon the death of the individual, the State is paid back first for any government benefits paid during his/her lifetime before distributing to anyone else. This trust can be used for many things, including medical treatment beyond Medicaid, dental, recreational, home, or rent.
  • Pooled Accounts Trust – can be used to preserve government benefits, established and administered by a non-profit organization. Remaining assets at death are left with a charity or paid back to the state before being distributed to others.

ABLE Accounts are tax-advantaged savings accounts for individuals with disabilities and their families. The beneficiary of the account is the account owner, and income earned by the accounts is not taxed. Contributions to the account made by any person (the account beneficiary, family and friends) are made using post-taxed dollars.


ABLE accounts allow eligible Individuals the opportunity to save and fund a variety of Qualified Disability Expenses without endangering eligibility for certain benefits that are critical to their health and well-being, such as Medicaid and Supplemental Security Income (SSI).


ABLEnow is the Virginia-sponsored ABLE savings program, there are special tax advantages for Virginia taxpayers. Earnings grow free from both federal and state taxes. Virginia also offers an annual state income tax deduction of up to $2,000 per contributor for contributions to an ABLEnow account.

Generally, funds in an ABLEnow account are disregarded when determining eligibility for certain federal benefits. ABLEnow accounts are disregarded when determining eligibility to receive disability benefits provided by the Commonwealth of Virginia too.


With an ABLE account, account owners have the ability to control their funds and, if circumstances change, still have other options available to them.


Determining which option is the most appropriate will depend upon individual circumstances.


An ABLE Account provides more choice and control for the beneficiary and family compared to a trust.


The cost of establishing an ABLE account is usually significantly less than establishing a trust.


Individuals/families may have ABLE accounts and trusts.