To be eligible, a person鈥檚 disability must meet a severity threshold and the disability must have begun before they reached the age of twenty-six. Starting January 1, 2026, the ABLE Age Adjustment Act expanded eligibility to those whose disability began before the age of forty-six.

To meet the disability requirement, an individual must be receiving Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) because of a disability. SSI聽provides monthly payments to people with disabilities and SSDI provides monthly payments to people who have a disability that stops or limits their ability to work. Another way to achieve eligibility, if not receiving SSI or SSDI, is to have a licensed physician sign documentation stating that the individual’s disability meets a “marked and severe” functional limitation standard as stated in the ABLE law.

My disabled son has money in a checking account and he is preparing an application for SSI. Should he open an ABLE account?

Opening an ABLE account (achieving a better life experience) is a great idea for your son because it allows him to save money without affecting his eligibility for public benefits, such as SSI. Each state has its own statute authorizing ABLE accounts; the New York statute was effective in September 2017.

Am I allowed to use funds from my Supplemental Needs Trust to pay for groceries for my beneficiary?

The rule has always been that you cannot use trust funds to pay for food for a recipient of Social Security Income (SSI), without causing a reduction in benefits; but this is changing. Effective September 30, 2024, food will no longer be considered 鈥淚n-Kind Support and Maintenance鈥� (ISM) for SSI purposes. So yes, you will be able to use the money in the supplemental needs trust to buy food for your beneficiary!

SSI is a program created to provide support to individuals with limited income and assets who are disabled, blind, or over the age of 65. While the amount of SSI received varies for each person based on their own circumstances, the maximum a single person can receive monthly is $943, $1,415 for a couple. However, the amount received would be reduced by ISM.

You mentioned that a disabled person may benefit from creating a supplemental needs trust (鈥淪NT鈥�) in addition to having an ABLE account. Can you explain more about SNTs?聽

In addition to opening an ABLE (achieving a better life experience) account, a person with disabilities may want to create a SNT. Both SNTs and ABLE accounts allow people with disabilities to save money without affecting their eligibility for public benefits such as SSI. An individual may choose to open one or the other, or both, depending on the amount of money they have and the anticipation of future funds from earnings or inheritance.

There are two main types of SNTs. A first-party trust is self-funded by the beneficiary of the trust. To create a first-party SNT, the beneficiary must be younger than 65 years old. New funds may not be deposited into this SNT after the beneficiary turns 65. A third-party trust is funded by someone else, such as a parent or grandparent. There are no limits to the amount that can be contributed into either of these per year, and there is no limit to the total asset balances in the trust.听

Because the trust owns the assets, the beneficiary can remain eligible for benefit programs that have an asset limit, such as SSI. A trustee will be designated to control the assets in the trust and oversee the management and disbursement of its funds. SNTs allow the beneficiary to use the funds for expenses not paid for by public benefits. Such expenses can include clothes, entertainment, educational and recreational expenses, and transportation. SNTs may not be used for everyday expenses such as groceries.听

While SNTs do not have contribution or balance limits as ABLE accounts do, they have more complicated rules for what the funds can be used for, they can be expensive to set up and complicated to manage. ABLE accounts are easier to set up and manage, but there are limits on the amount of money you can contribute each year and limits on the overall balance. A qualifying individual does not need to choose between the two accounts. An SNT can be established for purchases and expenses not covered by public benefits, and an ABLE account can be set up for basic cost of living expenses and everyday expenses.听

Author: Britt Burner, Esq.

Do You Need to Revise Your Estate Plan?

The short answer? Absolutely. A change as significant as a beneficiary鈥檚 disability necessitates a review of your estate plan. This is not just a legal requirement but a moral obligation to ensure your loved one鈥檚 changing needs are adequately addressed.

All supplemental needs trusts (鈥淪NT鈥�) are created for the sole benefit of a disabled individual. This type of trust is designed to provide support for a beneficiary without jeopardizing their receipt government benefits, namely Medicaid and SSI. In general, an individual receiving Medicaid or SSI can only have limited assets in their name. A supplemental needs trust provides funds that supplement not supplant the government benefits. The trust assets can be used to enhance the disabled individual鈥檚 quality of life. Some examples being clothes, entertainment, educational and recreational expenses, and transportation.

There are two main types of supplemental needs trusts, first party and third party. A first party supplemental needs trust is funded with the beneficiary鈥檚 own assets while the beneficiary is under age 65. This type of SNT may be created by the disabled individual, a parent, grandparent, guardian or the court. Since the trust contains the disabled beneficiary鈥檚 assets, the trust must contain a 鈥減ayback鈥� provision. That is, if there are any assets left at the end of the beneficiary鈥檚 life, they must be used to pay back Medicaid for any cost of care expended. Only after Medicaid recoups can the remaining funds, if any, be distributed to other individuals.

A first party supplemental needs trust is most often created when the individual receives a legal settlement. A first party trust is also necessary when a disabled beneficiary receives an inheritance directly. Inheritances should ALWAYS pass to a disabled individual in a third party SNT to avoid the payback provision.

A third party supplemental needs trust is one created by a third party for the benefit of a disabled individual of any age and funded with that third party鈥檚 assets. It can be created during the life of the grantor or at the grantor鈥檚 death. The latter is a testamentary trust used to pass an inheritance to a disabled individual. Anyone can create a third party supplemental needs trust and there is no requirement to pay back Medicaid upon the beneficiary鈥檚 death. Instead, the grantor can choose who will ultimately inherit the assets at the disabled individual鈥檚 death.

A sole benefit trust is a type of supplemental needs trust that combines some aspects of a first and third party trust. A sole benefit trust using a third party鈥檚 assets to benefit a disabled individual under 65 years of age. A sole benefit trust is often used so that the grantor can also qualify for Medicaid without a penalty period due to the transfer. Since there is no transfer penalty for the grantor, this type of trust requires actuarially sound distributions during the beneficiary鈥檚 lifetime and any remaining assets left to the beneficiary鈥檚 estate. By having assets pass through the estate, Medicaid can seek recovery. Actuarially sound distributions are based on the life expectancy of the beneficiary.

As you can gather, the appropriate type of SNT depends on the circumstances. For beneficiaries receiving SSI, there are additional strict distribution guidelines. Use of trust assets to pay for food and shelter results in the 1/3 reduction of SSI benefit. Cash paid directly to the SSI beneficiary is countable income that reduces SSI benefits dollar for dollar 鈥� so cash is never given to an SNT beneficiary.

Due to the complexities, anyone planning to leave assets to a disabled individual should consult an estate planning attorney. Likewise, your personal injury attorney and estate planning attorney should work together on any settlement for a disabled individual. Many times the need for government benefits is necessary for reasons not related to monetary support.

The purpose of an Article 81 discovery and turnover proceeding is to recover assets taken from an incapacitated person. The threshold question in an Article 81 Guardianship is whether there is a need for a guardian. After the court makes that determination, the alleged incapacitated person must either consent to the appointment or be deemed incapacitated after a hearing. If the court decides to appoint a guardian, they issue an Order and Judgment which outlines the powers granted the guardian. One such power provided for a property management guardian in Section 81.21 of the Mental Hygiene Law is the power to commence a discovery and turnover proceeding.

A discovery and turnover proceeding provides a post-judgment mechanism to address financial exploitation. The guardian can recover property that was improperly transferred before the guardianship. The logistics for the proceeding are set forth in Section 81.43 of the Mental Hygiene Law. A discovery and turnover proceeding is initiated by an Order to Show Cause and Petition. The Petition must set forth facts that tend to show that the incapacitated person鈥檚 assets are wrongfully in the possession of a third party. If the Petition alleges reasonable grounds to believe that a person has information about the property, the court must sign the Order.

Usually, the discovery portion of the proceeding Orders the Respondent to appear before the court for inquiry. The court can issue subpoenas for third party financial records. Ultimately, a hearing is held to determine proper ownership. The Judge can Order any third party to turn over the property to the guardian or grant a judgment against the third party for the value of the assets.

One of the main reasons for guardianships is that incapacitated people are vulnerable to financial abuse. An Article 81 discovery and turnover proceeding allows an efficient and expedited way to recover property. Otherwise, such a case could be tied up for years in Supreme Court. Consult an experienced guardianship attorney right away if you believe someone needs a guardian and/or is the victim of abuse or exploitation.

Article 81 of New York鈥檚 Mental Hygiene Law allows a court to聽appoint a guardian聽to manage the personal and/or financial affairs of an individual deemed incapacitated. The court must find that the alleged incapacitated person (鈥淎IP鈥�) cannot appreciate the nature and consequences of their inability to handle such matters and that the AIP is likely to suffer harm if a guardian is not appointed.

In a guardianship proceeding, there are two sets of powers at play: 鈥減ersonal needs鈥� powers and 鈥減roperty management鈥� powers. Personal needs powers relate to decisions people make in their everyday lives.听 This includes healthcare decisions and where to live. Property management powers encompass powers related to managing financial affairs. Sometimes an AIP needs a guardian of the person and property, while other times an individual needs a guardian for only one of the two sets of powers.

The detailed powers of an appointed guardian are set forth in the Order appointing the guardian. Section 81.20 (a)(1) of the Mental Hygiene Law provides that 鈥渁 guardian shall exercise only those powers that the guardian is authorized to exercise by court order.鈥� Once in place, a guardianship lasts for the lifespan of the incapacitated person (鈥淚P鈥�), unless otherwise specified. As circumstances change, the Court may be further petitioned to expand or remove powers awarded to the guardian.

The court may expand the power of the guardian if it appears that such modification is necessary. The modification may only occur after a hearing on notice to the persons entitled to such notice. The hearing provides a means for determining whether the new powers are consistent with the IP鈥檚 needs. The burden of proof is on the person seeking expansion of powers.

Common examples of expansion of powers include Medicaid planning, the establishment of a trust and to change place of abode. If the IP requires long term care (at home or in a facility), the guardian may want to engage in聽Medicaid planning聽to preserve some of the assets. The guardian may need to gain authority to establish trusts or transfer assets. Property might have to be sold. In most cases, if the guardian wants to move the IP, court approval is mandatory. If the IP resides in the community and the guardian wants to move the IP into assisted living, this is an expansion of powers.

If the court grants the relief, the guardian will receive a new Order and Judgment or Supplemental Commission outlining the new powers. It is very important to understand the specific powers granted in the order and judgment. Guardianships in New York are strictly tailored to the particular circumstances. When unsure if a guardian has a particular power, consult an聽experienced guardianship attorney.

ABLE accounts are tax-advantaged savings and investment accounts for disabled individuals. We often get questions about the difference between an ABLE Account and a Supplemental Needs Trust and whether one is better than the other for a disabled child. There are several planning techniques that you can take advantage of to protect assets on behalf of your child with special needs. ABLE accounts were enacted under the Stephen Beck Jr. Achieving a Better Life Experience Act of 2014, known as the ABLE Act. The Act recognizes that living with a disability can be costly and created a simplified way for families to put money away for a disabled individual.

Before exploring ABLE accounts, it is important to understand the different options available when planning for a disabled child鈥檚 future. At the outset, Supplemental Needs Trusts, also known as a Special Needs Trusts, are often used to protect assets for disabled individuals.听 Assets and income in an SNT can be used for a disabled individual鈥檚 benefit without disqualifying them from receiving government benefits. There is no limit to the amount of assets that can be placed in a properly drafted SNT. The assets in the trust are handled by a Trustee to enhance the quality of life of a person with disabilities without interfering with any government benefits, such as Supplemental Security Income, Medicaid, FAFSA, HUD and SNAP/food stamp benefits.

Generally speaking, there are two categories of Supplemental Needs Trusts (鈥淪NT鈥�): a聽First-Party SNT聽and a Third-Party SNT.听A First-Party SNT聽protects assets that belong to the disabled individual (e.g., a personal injury award). A Third-Party SNT is funded for the benefit of the disabled person using someone else鈥檚 assets (e.g., an inheritance from a parent). An important difference between the two trusts is the distribution of assets upon the death of the disabled person. Specifically, a First-Party SNT must pay back any monies paid by Medicaid during the disabled person鈥檚 lifetime. In contrast, a Third-Party SNT does not have to pay back Medicaid.

The creation of an ABLE account is an important step forward for special needs planning. It provides a simple solution when relatively modest amount of assets is involved. An ABLE Account can be used on its own or in conjunction with a SNT. To be eligible for an ABLE account, a person must have a qualifying disability that was present before the age of 26, with one of the following:

• Classified as blind (as defined in the Social Security Act);
• Entitled to Supplemental Security Income or Social Security Disability Insurance because of the disability;
• Have a disability that is included on the Social Security Administration鈥檚 List of Compassionate Allowances Conditions; or
• Have a written diagnosis from a licensed physician documenting a medically determinable physical or mental impairment which results in marked and severe functional limitations, that can be expected to last for at least a year or can cause death.

An ABLE account can be created by the disabled individual, parent, guardian, or agent under a power of attorney. ABLE accounts are considered a tax advantaged way to save and pay for disabled individuals鈥� qualified expenses without jeopardizing eligibility for critical government benefits. Any contributions can grow tax free. Distributions, including earnings, from the ABLE account are tax-free to the beneficiary 鈥� if used to pay qualified disability expenses.听Some examples of qualified expenses include housing, transportation, education, assistive technology, and legal fees. If the ABLE account is used for non-qualified expenses, the 鈥渆arnings鈥� portion of the withdrawal is treated as income and is subject to federal and state taxes, as well as a 10% federal tax penalty.

The beneficiary of an ABLE account can also contribute their income to the account, up to the poverty-line amount for a one-person household. For 2021, this amount is $ the poverty-line amount for a one-person household $12,880.00. This contribution is not allowed if their employer contributes to a workplace retirement plan.

Importantly, total annual contributions to ABLE accounts cannot exceed the federal annual gift tax exclusion ($15,000 in the year 2021) 鈥� from all sources. Up to a certain amount, the money in an ABLE account will not interfere with Supplemental Security Income (鈥淪SI鈥�) or Medicaid benefits. However, there are limitations for individuals receiving SSI. Specifically, when an ABLE account balance over $100,000 exceeds the SSI resource limit (on its own or combined with other resources), the SSI payments are suspended. SSI resumes when the countable resources are again below the allowable limit. Medicaid benefits remain unaffected.

Similar to the above mentioned First-Party SNT, when an ABLE account beneficiary dies, there is a payback to Medicaid for Medicaid-related expenses. This payback exists regardless of who made contributions to the ABLE account.

Creating and funding an ABLE account can provide a disabled person with a sense of autonomy, while preserving much needed government benefits. It works much like a聽529 Plan聽for education, but for qualified expenses instead of education. Whether an SNT, ABLE Account or both should be used depends on each family鈥檚 situation. Special Needs planning involves putting together a comprehensive estate plan for the entire family so that all the different parts work together. At Burner Law Group, our attorneys are experienced in聽special needs planning. We can help you provide for a disabled individual after you are gone in a way that affords them the greatest independence.