Are Able Accounts Cheaper Than Special Needs Pooled Trusts?
In the realm of financial planning for individuals with special needs, there are various options available to ensure their well-being and financial security. One such option is the special needs pooled trust, which is designed to manage assets for individuals with disabilities. However, many are now questioning whether an able account might be a more cost-effective alternative. This article explores the differences between able accounts and special needs pooled trusts, highlighting why able accounts might be a cheaper option.
Understanding Special Needs Pooled Trusts
Special needs pooled trusts are established by non-profit organizations to manage assets on behalf of individuals with disabilities. These trusts allow individuals to receive gifts, inheritances, and other forms of financial support without disqualifying them from receiving government benefits like Supplemental Security Income (SSI) or Medicaid. The assets in the trust are pooled with those of other beneficiaries, and the trust pays for the beneficiary’s needs, such as medical expenses, housing, and education.
While special needs pooled trusts offer many benefits, they come with certain drawbacks. One significant disadvantage is the administrative costs associated with managing the trust. These costs can be substantial, as the trust must be managed by a professional trustee, who is responsible for overseeing the trust’s operations and ensuring that the funds are used appropriately.
Introducing Able Accounts
An able account, also known as a first-party special needs trust, is a type of trust that is established by an individual with a disability. Unlike special needs pooled trusts, able accounts are not managed by a professional trustee, which can result in lower administrative costs. The individual with a disability can serve as the trustee or appoint a family member or friend to manage the account.
Able accounts offer several advantages over special needs pooled trusts. First, they provide more control and flexibility for the individual with a disability. The trust can be tailored to meet the specific needs of the beneficiary, and the funds can be used for a wider range of purposes, including personal expenses, entertainment, and travel.
Cost-Effectiveness of Able Accounts
One of the primary reasons why able accounts may be cheaper than special needs pooled trusts is the lower administrative costs. Since able accounts are not managed by a professional trustee, the costs associated with hiring and paying a trustee are eliminated. Additionally, able accounts may offer more cost-effective investment options, as the individual or their appointed trustee can manage the investments directly.
Moreover, able accounts may provide tax advantages. While special needs pooled trusts are subject to income tax on the earnings generated by the trust, able accounts can be structured to minimize or eliminate income tax liabilities. This can result in significant savings over time.
Conclusion
In conclusion, able accounts may be a more cost-effective option for individuals with special needs compared to special needs pooled trusts. The lower administrative costs, increased control and flexibility, and potential tax advantages make able accounts an attractive choice for many. However, it is essential to consult with a financial advisor or attorney to determine the best option for each individual’s unique situation. By carefully considering the pros and cons of both able accounts and special needs pooled trusts, individuals with special needs can ensure their financial security and well-being.
