Using an ABLE Account with a WisPACT Trust?

Wispact trusts are a popular topic on our blog (click here for our first four articles WisPACT 1, WisPACT 2, WisPACT 3, WisPACT 4).  A quick refresher – WisPACT trusts allow loved ones to set funds aside for a disabled individual’s needs without jeopardizing eligibility for government benefits such as Supplement Security Income (SSI) or Medicaid.

While WisPACT can pay for most expenses that a beneficiary would incur, there are a few restrictions.  The concept of “in-kind support and maintenance” is critical to understand for recipients of SSI income (different than Social Security Disability a/ka/ SSD or SSDI income).  The Special Needs Alliance sums it up in their excellent Special Needs Trust Handbook for Trustees by explaining:

“SSI also has a concept of “in-kind support and maintenance” (ISM) that is central to much understanding of special needs trust administration. Any payment from a third party (including a trust) for necessities of life—food or shelter (note that the federal government deleted “clothing” from the list of necessities in March 2005) to a third-party provider of goods or services—will be treated as countable income, albeit subject to special rules for calculating its effect.”

Achieving a Better Life Experience, or ABLE, accounts are another tool for helping supplement a disabled person’s needs.  Unlike special needs trusts, ABLE accounts do not carry the same ISM limitations.  Likewise, earnings on an ABLE account do not count as taxable income.

So, WisPACT trusts and ABLE accounts can actually be used together.  A beneficiary’s WisPACT trust may make a distribution to an ABLE account to provide services that would normally qualify as ISM, without the risk of jeopardizing the individual’s SSI benefit.

However, you want to be careful to not “overfund” ABLE accounts because they are subject to “payback” provisions.  This means that any funds remaining in the account after the disabled beneficiary’s death must be paid to the state that provided benefits to the individual, even if the funds come from a third party.

Wisconsin is one of only seven states in the U.S. that does not have its own ABLE account program.  However, Wisconsinites are allowed to open accounts in other states that do offer them.

If you have more questions about whether an ABLE account or WisPACT trust is right for you, please reach out to one of our Elder and Special Needs planning attorneys to discuss your specific circumstances.

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Jon L. Fischer

Estate Planning and Elder Law Attorney at McCarty Law LLP
Jon focuses his practice on estate planning, probate matters, and Medicaid planning as he aims to help clients in their time of need.