ABLE accounts, SNT's and TrueLink - OH MY!
A framework for use based upon my personal experience
I’m writing this from the perspective you already know what each of these is. I’m not going to provide detailed descriptions. Here are links if you would like to learn more about any/all of these. ABLE National Resource Center is your “go-to” for ABLE Accounts. The Special Needs Alliance has a great newsletter written by expert attorneys. This is an older (2013) article explaining the differences between a 1st and 3rd-Party Special Needs Trust. Kai Stinchcombe, Founder of True Link and I talk about why he started his company in this interview.
ABLE Account
I opened my son’s ABLE account because he had a UTMA account. This meant the money in the account would be countable as his asset once he turned 18. Since I wanted to apply for Supplemental Security Income (SSI), this was a problem. At the time Maryland didn’t have an ABLE account, so I opened it in Virginia. I’ve kept it there because my experience with Maryland ABLE was very unsatisfactory when I tried to move it.
I have not made funding his account a priority because at this time he is unable to manage it. He’s not working, I’m not worried about him having too much money in the bank. I use some of his Social Security benefits to cover his share of our internet, utilities, and his cell phone. What’s left I split between his ABLE and TrueLink accounts.
To date, I’ve used his ABLE account to cover dental work and a new laptop. My current plan is to get the account to $10k and stop funding it. At $10k the monthly fee stops. Should he start working (and I really hope he does) then I will revisit this. It’s my hope he’ll earn enough that it makes sense to start putting more money into the ABLE account.
Since I’m covering his expenses anyway, it doesn’t make sense (to me) to put money into the ABLE account just to take it back out. I’ve done it for relatively large expenditures (> $600), but I would much rather his staff use the TrueLink card for more “routine” things. TrueLink doesn’t have any requirements, I don’t have to worry about proving something was a “qualified disability expense”.
If you, or someone you’re working with, is thinking about opening an ABLE account please take the following into consideration. I feel ABLE accounts are recommended far too often in cases where they don’t really make sense. Or at least shouldn’t be the priority.
The individual with the disability either isn't able to or doesn't want to, manage their money. This means the family will need an "Authorized Legal Representative", or to put it more simply - it's adding yet another thing for the family to do.
Many families don't have the means to contribute to the ABLE account. They are barely getting by, and I don't want to see them use an ABLE account instead of buying life insurance and funding a Special Needs Trust.
There is a lot of concern about not using the ABLE account correctly. This adds stress to families who are already overwhelmed. They don't need to be worrying about whether something is a "qualified disability expense" or not.
Special Needs Trust
My situation is somewhat unique in that I need both a First-Party and a Third-Party Special Needs Trust. Most of you shouldn’t have to use a First-Party Trust. The biggest risk would most likely be your parents or another family member leaving money to your child directly, instead of to their Third-Party Trust. This is very avoidable but does require proactive planning with an attorney on your part.
The National Defense Authorization Act of 2015 (Sec. 624) changed the law regarding military Survivor Benefit Plans (SBP). Prior to this, retiring service members could not leave their SBP to adult disabled children, the only available option was self or self and spouse. Now retiring service members have the option to leave their SBP to their adult disabled child, but by law, it MUST be paid to a First-Party Trust. I will write a future Waypoints article exploring SBP in-depth, for now here are links to YouTube videos explaining it - Introduction to Veteran Benefits; SBP Update.
So the portion of my pension my son will receive after I die will be paid into the First-Party Trust. Since this Trust will have a Medicaid pay-back provision it will be used first. My pension will be the ONLY money going into this Trust. Any money left in my bank, investment, and retirement accounts will go to his Third-Party Trust. As will my life insurance.
When you’re asking yourself “Do I need a Special Needs Trust?” consider the following. This list isn’t all-inclusive, it’s meant to start the conversation.
What benefits does your child currently receive? If they’re not receiving benefits yet, what benefits will they qualify for?
What are you subsidizing? If you were around to pay for everything, what would your child need to pay for? How much would this cost each month?
With the understanding that if your child is receiving Residential services, those benefits will not pay for rent/mortgage or any “extras” like furniture, how much money will your child need?
Public benefits like SNAP and Housing vouchers are meant as “supplements”, they will not cover all your child’s food and shelter costs.
What will your child receive in Social Security benefits? Will they qualify for the Disabled Adult Child benefit?
What are your child’s current medical bills? Federal employees can keep their children on their health insurance for as long as the retiree is alive. The same is true for some county/state and private sector employees. Military dependents can keep their benefits for life (theirs). It can be very difficult to find dentists and therapists who accept Medicaid, so your child will most likely need to pay for this out of pocket.
Where will your child live? If they’re going to stay in your house who will do the upkeep and yard maintenance?
I’m a fan of using life insurance to fund Special Needs Trusts. I have a $1M whole-life policy. I want to leave my son to have at least $5k/month ($60k/year) to cover his expenses. I bought my insurance back in 2014 before the law changed authorizing him to receive my SBP.
I haven’t reduced my life insurance because what the government gives the government can take away (I admit I’m paranoid). I would much rather leave my son more money than he’ll use and have the remainder go to charity than not leave him enough and hope everything works out. I’m going to be dead, it’s not like I can step in to fix something after I’m gone.
I’m not a fan of leaving income-producing assets in SNTs because of how Trusts are taxed. This is much too complicated of a topic to dive into here, but it’s definitely a conversation you need to have with your estate planning attorney. Retirement accounts are for you, please plan on using them to enjoy your life. If there’s money left over, then, by all means, put it into the Trust.
TrueLink Account
I LOVE my son’s TrueLink card! I have it linked to his Rep Payee account, and I transfer money into it each month. I keep it below $2,000 to maintain his eligibility for SSI and Medicaid. Usually, there’s ~ $150 in the account. Enough to let him buy pizza or Mcdonald's a couple of times a week.
TrueLink has partnerships with some States, so their ABLE account owners can use a TrueLink card with the ABLE account. It’s a prepaid Visa card. What makes it so unique is the ability to control where you can spend the money. It also gives you control over how much may be spent in any given category. Like I said, I’m a HUGE fan.
Because it tracks what you spend money on you don’t have to keep additional records if you’re using it in a State that has it tied to the ABLE account. For families, there is a monthly fee of $12. So if you’re not going to use it regularly I wouldn’t open an account.
I think it’s a great tool. You can use it to help teach your child how to manage their spending. It gives them a sense of independence and control while keeping them safe. You can “turn off” categories you don’t want them to have access to, like liquor stores. You can also set up alerts and monitor their spending from your phone (they have an app).
I hope this gives you a useful framework. Planning for the life of a disabled child is incredibly difficult and stressful. I’ve found it very hard to figure out. I want to help you avoid the mistakes I’ve made. Please consider sharing this article. I’m not putting it behind a paywall because I want to counter all the clickbait I see.
Parents and professionals need actionable content. There is much more nuance to planning than just opening an ABLE account or establishing a Special Needs Trust. As always I’m open to comments, constructive criticism, and feedback. If there’s a disability planning topic you would like me to cover please let me know. Thank you for reading.
Thx so much for sharing this helpful info, Eric. I'm getting a TrueLink account and can't wait! So grateful to you for all you do to help families like mine.