Alternatives to Special Needs Trusts
Special needs trusts are costly to administer. Consequently, there are some situations where it is prudent to explore more cost-effective options, usually due to smaller asset amounts available to fund the trust. Alternative options are limited and subject to review by public benefit agencies.
MSNT encourages individuals, families, guardians and service organizations to explore the other options to a special needs trust. Special needs trusts are a useful tool and a long-term plan for savings; however, they are not always a good fit for everyone. Alternatives to opening a trust include spending down the funds, prepayment of living expenses and ABLE accounts. Read below for more information on each.
Spend Down the Funds for Exempt Assets
Funds received by an individual are counted as income in the month received and an asset the following month if not spent. One way to spend funds is to purchase exempt assets. Exempt assets include: a home, a vehicle and an irrevocable prepaid burial policy. Public benefit authorities have upper limits on some exempt assets, and it is best to check applicable polices regarding the purchase of an exempt asset.
Prepayment of Living Expenses
Prepayment of living expenses may be an option for some to spend excess funds. The following is a list of living expenses:
- Rent, utilities, insurance premiums or a home warranty program
- Dental treatment services or dental insurance premiums
- Educational expenses
- Hygiene and care supplies that are necessary but not covered by Medicaid or Medicare such as, but not limited to, diapers, orthotics, wheelchair batteries or repairs, compression hosiery, nutritional supplements or other similar supplies
- Documented loans or consumer debt accumulated while awaiting eligibility or a settlement, including promised payment to family caregivers and documented with written agreements
- Recreational or cultural expenses such as a concert series or membership at a gym or wellness center
An account made possible under the Stephens Beck Jr. Achieving a Better Life Experience Act of 2014 may be a viable alternative to a special needs trust for some individuals. Similar to College 529 savings plans, ABLE accounts are available as a financial planning tool for persons with disabilities and their families. An ABLE account can provide autonomy and independence.
An ABLE account allows savings to be set aside for the needs of a person with disability without impacting their eligibility for public benefits. The annual contribution cap for ABLE accounts is currently set at $15,000. Requirements for an ABLE account include:
- Beneficiary must have become disabled prior to age 26
- Only one account per person (more than one donor may contribute)
- Medicaid payback
- Utilization only for qualified disability expenses
- For more information on the MO ABLE accounts, please visit moable.com.
In many cases, an individual could benefit from both a special needs trust and an ABLE account.