Florida ABLE Accounts and Special Needs Trusts
As an elder law attorney, who focuses on Medicaid planning, more attention is being brought to ABLE accounts and how they interact with special needs trusts in Florida. This article will begin with providing a very basic understanding ABLE accounts and Special Needs Trusts, it will then delve into their differences, and finally how Special Needs Trusts and an ABLE account can work together to protect Medicaid or SSI of a disabled individual.
A Primer on ABLE accounts and Special Needs Trusts
ABLE Accounts – The Basics
ABLE stands for: Achieving a Better Life Experience and was brought into existence by the ABLE Act which allowed for the creation of ABLE accounts in Florida.
Any Florida resident who has a qualifying disability since before turning 26 years old, can contribute up to the gift-tax exemption amount (currently $18,000 per year as of 2024) from any source. Funds can be allocated to different investment strategies (pick from the predetermined portfolio allocations with ABLE United) and withdrawn by the disabled individual or their legal guardian or agent (tax-free if used for qualified expenses – i.e. education, housing and other basic living expenses, transportation, employment training, health, assistive technologies, prevention and wellness, financial management fees, legal fees, funeral/burial costs). Funds can go directly to the disabled individual’s personal checking account or funds can be transferred to a 3rd party directly via an ABLE United bank check (the same way you can pay a bill with a regular bank).
Up to $100,000 can be retained in the ABLE account while maintaining SSI eligibility.
Up to $418,000 can be retained in an ABLE account if SSI is not needed (but Medicaid-eligibility is). Medicaid estate recovery cannot occur on Florida ABLE accounts as of the passing of HB 6047 on June 30, 2019 - but funds would go to the estate where Medicaid would still remain as a creditor.
ABLE accounts protect food-stamp and Section 8 eligibility in addition to SSI and Medicaid.
- NOTE: as of January 1, 2026, the age-of-disability-onset restriction will increase. In 2026, those who became disabled before turning 46 years old will be able to open ABLE accounts.
Special Needs Trusts – The Basics
Before ABLE accounts were an option - one of the primary ways those with excessive resources / assets could maintain their needs-based public benefits, such as Medicaid, was to create either a first-party special needs trust (if it’s the disabled individual’s money - e.g. maybe from an inheritance or from a personal injury award). First-party special needs trusts can be managed by a trustee of the beneficiary's choosing or professionally via a pooled special needs trust) or third-party special needs trust (to hold assets that originated from other people… the most common example is a parent might leave money to benefit their disabled child via a third-party special needs trust as opposed to it being left outright to the disabled child).
The primary benefit to a third-party special needs trust is that there is no Medicaid estate recovery / payback obligation as opposed to a first party special needs trust, which must include a Medicaid payback obligation for funds remaining in the special needs trust when the Medicaid beneficiary passes away.
Some Differences Between ABLE accounts and Special Needs Trusts
The big similarity, of course, is that both ABLE accounts and Special Needs Trusts allow someone to qualify for SSI and Medicaid and benefit from assets and resources in excess of $2,000.00. However, there are some important differences between Special Needs Trusts and ABLE accounts as well.
Direct Control of the Money
Probably the most essential difference is one of control. Ina special needs trust (first part SNT or third party SNT) the only person in the world who may never directly control or touch the funds inside of it, is the Medicaid or SSI beneficiary themselves. The funds are used for their benefit, but the disabled individual has no direct control.
The ABLE account, on the other hand, allows a beneficiary receiving Medicaid or SSI to directly access and control the money held within the ABLE account.
Amount of Money Placed into the ABLE account vs. Special Needs Trust
There is no limit on the amount of money that can be placed into a special needs trust at any time. ABLE accounts, on the other hand, have yearly contribution limits (only $18,000 per year as of 2024)
Medicaid Estate Recovery / Medicaid Payback Obligation
In a first-party special needs trust context – upon the Medicaid beneficiary’s death, the trustee has an obligation to freeze assets in the trust, write to Medicaid, and determine how much they paid for the deceased Medicaid beneficiary’s care during their entire life. Only after the state is paid back, can the Medicaid beneficiary’s heirs receive dollar one. This is referred to as Medicaid Estate Recovery in Florida.
ABLE accounts are still able to make payments after the beneficiary’s death (e.g. funeral expenses, outstanding guardianship fees) and remaining funds are not subject to Medicaid estate recovery.
Age
Another huge difference between an ABLE account and a Special Needs Trust pertain to age. Currently anyone over the age of 65 may not open their own self settled first party special needs trust (for their own money - they are limited to a pooled special needs trust).
- As a side note, a pooled special needs trust is not useful for SSI recipients (because it is subject to a three-year look back). But are great for Medicaid recipients.
An ABLE account can be opened for any disabled individual regardless of age, provided you can prove that individual was disabled at age 25 or earlier.
Need for an Elder Law Attorney or Medicaid Planning Lawyer
An ABLE account can be opened up online without hiring an elder care lawyer or Medicaid attorney (although you may still want to consult with one), while creating a special needs trust requires an attorney to draft the actual document (even pooled special needs trusts often require – or is greatly assisted by – an attorney’s assistance to join).
In short, special needs trusts can be relatively expensive to establish. ABLE accounts are nearly free.
How ABLE Accounts and Special Needs Trusts Work Together
Because ABLE accounts can only receive $16,000 per year (as of 2022), it may make sense to create a special needs trust along with the opening of an ABLE account. The grantor or settlor of the special needs trust can then mandate or permit the trustee to transfer up to $16,000 from the special needs trust and into the ABLE account when there is a competent beneficiary or attorney-in-fact under a durable power of attorney (to provide both more flexibility and control over their funds).
It would also make sense to permit a trust protector to enable a trustee to fund an ABLE account from a special needs trust if it makes more sense down the line.
Medicaid and/or SSI recipients can leverage four different types of accounts (in theory):
- Personal Checking/Savings: to receive SSI payments and other earnings (use for paying rent/mortgage, utilities, meals/grocery bills, other ISM expenses, and cash needs).
- ABLE Account: to receive funds when personal checking/savings is about to exceed its $2,000 total limit (pays for qualifying disability expenses or supplements housing expenses such as HOA dues, utilities)
- First Party Special Needs Trust: to receive funds when receiving injury settlements or other gifts in excess of $16,000 (to pay for larger expenses). Special Needs Trust should avoid paying in-kind support and maintenance (ISM) expenses when possible.
- Third Party Special Needs Trust: to receive inheritances or large gifts (if the 3rd party plans properly…. i.e. Uncle Dave doesn’t leave money to the special needs beneficiary directly, but rather to their third-party special needs trust).
