When parents are caring for a disabled child, they have the dual responsibilities of ensuring their daily needs and requirements are met and planning for their future care. The sooner parents begin to save and prepare for their child’s long-term expenses, the better. However, if the child is going to depend on income-sensitive government benefits, funds must be set aside in the right way so as not to endanger their eligibility. Fortunately, parents can save for their kids by using tools like ABLE accounts and Special Needs Trusts without impacting their child’s benefits. Some parents may have a question: Can my disabled child have both an ABLE account and a Special Needs Trust?
What is an ABLE Account?
In California, an ABLE, or Achieving Better Life Account, is referred to as a CalABLE account. A CalABLE is a unique savings account for individuals with disabilities. A person can qualify to open this type of account if they have a disability that occurred before age 26 and receives benefits under SSI (Supplemental Security Income) and/or SSDI (Social Security Disability Insurance).
CalABLE accounts can have up to $100,000 in assets without impacting the account holder’s state and federal benefits. This matters because when a person receives benefits from SSI and MediCAL (California Medicaid), they are subject to strict income and asset limits. If a recipient receives or earns too much, they could end up disqualified from receiving essential income or medical benefits. With a CalABLE account, the account holder can make withdrawals to pay for certain disability-related expenses without endangering their public benefits.
What is a Special Needs Trust?
A special needs trust is a type of trust that can be created to benefit a person with a qualifying disability. The trust’s beneficiary can receive trust disbursements for specifically approved expenses without endangering their eligibility for government benefits like SSI and MediCAL. For instance, trust payments can cover certain costs, such as those related to education, travel, home furnishings, computers, entertainment, and transportation. Unlike a CalABLE account, a special needs trust does not have a contribution limit. The beneficiary cannot directly withdraw the funds from their special needs trust or have access to them.
Both CalABLE accounts and special needs trusts can be valuable savings tools for someone with a disability. Depending on the individual’s circumstances, one of these resources may be more appropriate than the other for their needs. A special needs trust may often be a better primary funding source for an individual’s extra expenses. This can be especially true if parents want to leave their estate to their child. However, a CalABLE account could be an excellent secondary support tool for a disabled individual. The best way to learn more about special needs trusts and CalABLE accounts is to consult with a special needs planning attorney. You and your counsel can consider the pros and cons of each savings device and determine what best fits your circumstances.
Contact a California Estate Planning Attorney
At the Law Offices of Alice A. Salvo, we are experienced California special needs planning attorneys who can help you evaluate your situation and consider the best savings options for your loved one. Contact us today to schedule your free consultation.