This article concludes our series on Planning for your Future. Like Part 4, discussing Supplemental Needs Trusts, “SNT”, this section is ONLY necessary if you are planning for yourself and/or any other Beneficiary that may require a needs-based public benefit, such as Supplemental Security Income (SSI) or Medicaid, now or in the future. Part 4 discussed the main types of SNT, but there are other options that may be used with a SNT or in lieu of one which is discussed in Part 5.
POOLED SUPPLEMENTAL NEEDS TRUSTS, “PSNT”
- These trusts are designed for multiple beneficiaries and the assets of all the beneficiaries are “pooled” under a trust agreement.
- Age Restrictions of Beneficiary – none.
How does it function?
- Each Beneficiary has a separate account and agreement for the sole benefit of the beneficiary.
- May be either first-party pooled trust (Beneficiary’s money) or third-party pooled trust (another person’s money to assist the Beneficiary).
- First-party is ONLY used if it is Beneficiary’s money as it has a Medicaid payback provision. Third-party does not require a Medicaid payback provision so you can leave to other Beneficiaries if your intended Beneficiary is deceased.
In Alabama, one option for PNST is the Alabama Family Trust. Generally, these trusts have lower contribution amounts. Costs associated with opening an Alabama Family Trust Account are:
- The initial investment is $1,500 with the Alabama Family Trust, https://www.alabamafamilytrust.com/.
- $750 set up fee
- $450 annual fee
- Additional costs for investment administration and tax preparation, refer to the Alabama Trust Fund website for more details.
Advantages of PSNT
- More affordable as everyone shares a master trust which means lower legal costs and perhaps better investment outcomes due to combined resources.
- Professional trust management which helps families that may not have the time or skill set to understand the trust rules. The trust rules must follow stringent Medicaid and SSI regulations.
- Simplifies trust process by assisting families in using trust funds for appropriate items. (i.e.: the needs-based public benefit, Medicaid/SSI, will not cover).
- Medicaid Payback – For first-party PSNTs only, if there are remaining funds after taxes and fund fees are satisfied. For third-party SNT, there is no Medicaid payback.
Appropriate examples of requests for spending money in a trust:
- Pre-need burial
- Dental, medical and pharmacy expenses*
- Therapy or rehabilitation services*
- Wheelchairs and other special equipment*
- Psychological or counseling services*
- Clothing
- Food
- Mileage
- Tuition, books, tutoring
- Travel and entertainment
- Household furniture and related items
- Durable medical equipment*
*If not covered by needs-based public benefit plan.
ABLE ACCOUNTS:
Another option to consider in addition to a trust or instead of a trust is an Achieving a Better Life Experience, “ABLE”, account. ABLE accounts are tax advantaged savings accounts for an individual with a disability that began before age 26. However, in January 2026, this rule will change to before age 46. The ABLE Savings Account is offered by the Alabama Treasurer’s office. For further information, you may call 833-711-2253 or 334-242-7515, or visit their website at https://www.ablenrc.org/
Purpose of an ABLE account:
- Individuals with qualifying disabilities may open a tax- advantaged “ABLE” account to save for qualified expenses without losing their eligibility to a needs-based public benefit plan. Another advantage is that the earnings in the account grow tax free.
Contribution limits for an ABLE account:
- In 2025 and 2026, the maximum contribution that may be contributed to an ABLE account is $19,000.
- However, if the Beneficiary is working there is an exception “ABLE TO WORK” that allows the Beneficiary to ALSO contribute an amount equal to current years’ gross income — NOT TO EXCEED $15,060 in 2025.
- Lifetime Account Limit- No new contributions are accepted if the proposed contribution causes the ABLE balance to exceed $475,000.
- Medicaid Payback: Yes, but limited to Medicaid benefits paid after the account is opened. A successor may be named and may be entitled to remaining funds after all trust commitments are satisfied and Medicaid is repaid.
How can you use the money in an ABLE account? - Expenses must be a “qualified disability expense”, which according to the ABLE website, includes the following:
Basic living expenses: Food, Heating fuel, Gas, Electricity, Water, Sewer, Garbage removal
Health and Wellness: Medical bills; Medications; Exercise services or equipment; Wheelchairs, walkers, hospital beds, and other durable medical equipment; Service Animals
Housing: Mortgage(including property insurance required by the mortgage holder); Real property taxes; Rent
Education and training: Textbooks, Tuition, Certification, Trade school, Attendant fees
Employment: Tools of the trade; Certification and licensing fees; Work-related uniforms; Job coaching; Start-up fees for entrepreneurs; Transportation; Car; Bus; Metro; Subway; Uber; Taxi; Train; Plane
Financial Management and Legal Fees: Tax preparation; Financial advisor services; Attorney fees; Court fees; Assistive Technology; Computer; Hearing aids; Screen reader; iDevices; Apps; Communication devices
Burial fees and expenses: Pre-planning fees for burial; Funeral and Burial Expenses; Pre-Paid Cemetery Plots
Advantages of an ABLE Account:
- An individual may keep up to $100,000 in an ABLE Account without being disqualified for a needs-tested public benefit for “resources”. Otherwise, the amount an individual may keep in their name (unless the funds are in a SNT or a PSNT is $2,000).
This is the last segment of our series, Planning for your Future. We hope you have learned some important information in the articles in our series Planning for your Future that may apply to you and your family’s unique situation.
Alabama State Bar Requires the Following: “No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers.” Responsible Attorney: Anne Elizabeth McGowin.