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ABLE Accounts Pay Shelter and Food through Special Needs Trusts

March 3, 2020

ABLE Accounts Pay Shelter and Food through Special Needs Trusts

If the beneficiary of a Special Needs Trust became disabled prior to the age of 26, the trustee can fund an ABLE account, regardless of the kind of special needs trust. If a Special Needs Trust has been paying for shelter and food costs and the beneficiary is an SSI recipient, he or she has been receiving less than the maximum SSI payment from Social Security, as this payment is considered as a special type of income called “in-kind support and maintenance.” This results in a maximum deduction of approximately $290 monthly from the SSI payment. A distribution into an ABLE account for the same amount as shelter and food costs, and for purposes of payment of these expenses, will not result in the in-kind support and maintenance deduction; thus increasing the SSI recipient’s annual income by approximately $3,000 annually. 

ABLE accounts can be used for all payments toward “qualified expenses,” which are considered to be “disability related.” The list is quite expansive and shelter and food are included. You may wish to refer to for their description of qualified expenses. Social Security itself has anticipated the use of ABLE accounts in this manner and has published a procedure on the topic. Please refer to Social Security Administration POMS SI 01130.740 (C)(4).

Proper use of an ABLE account to pay for the shelter and food expenses will eliminate the in-kind support and maintenance deduction from SSI, however, are there ways a beneficiary can trigger loss of benefits? Unfortunately, the answer is “yes,” requiring the beneficiary or a responsible party, to closely monitor the withdrawals from the ABLE account that are deposited into the beneficiary’s own account. For example, suppose Mary withdraws $1000 on the 15th of the month from her ABLE account and deposits it into her checking account. Mary has an automatic payment going to her landlord on the 26th of each month. One month, this auto payment did not execute and Mary’s checking account exceeded $2,000 for that month. Even though Mary paid the rent immediately when she discovered the error, her account still shows over the resource limit at the end of the month, resulting in a loss of SSI for that month. She needed to ensure that the shelter payment was made from her account. 

Using ABLE accounts in conjunction with Special Needs Trusts are an excellent way to effectively increase income to SSI beneficiaries. As long as there is careful monitoring of the account, this is a wonderful tool for special needs trustees and should be part of the overall annual cost analysis.

Author: Lee Ann Hitchman, CLPF/MBA and Licensed Professional Fiduciary