Zoom Autism Magazine Issue 6 - Page 44

BY Ed Zetlin & Mark Friese G ood things are worth waiting for. After over nine years of advocacy, the disability community received a victory with the passage of the Achieving a Better Life Experience Act (ABLE) in late 2014. ABLE is one of the hottest topics in the disability community and has been termed by many as one of the best pieces of new legislation since the American Disabilities Act. The ABLE Act was passed at the end of 2014 but is not available for funding yet. Many families with special needs members have heard of this new legislation but may be wondering how it might be beneficial to their particular situation. In this article we will address these questions and provide some clarity on the specific rules related to this new option. One of the most noteworthy benefits of the ABLE ACT is that it empowers the person with disabilities to own assets beyond the presently low allowable limit of $2,000 and save up to $100,000 and still be eligible for Supplemental Social Security Income (SSI) and Medicaid. Consequently, this encourages the person with disabilities to do what we all take for granted: save for a down payment on a house, put money aside as an emergency fund, or save for a dream vacation. In addition, the funding of the ABLE Act account can come from many sources, including earnings by the person that is disabled, family, friends and other interested parties. To be eligible to participate in the ABLE Act account, the onset age of the disability must be prior to turning age 26. You can be over 26 to 44 ZOOM Autism through Many Lenses establish the account, but you must have documentation of a disabling condition before age 26. Having a properly funded ABLE Act account does not impact SSI or Medicaid eligibility. But it gets even better. The earnings from a properly funded ABLE Act account grow tax deferred and, when withdrawn, are free from taxes. This rule is similar to the 529 accounts currently available for saving for education. There are, however, several rules of which the ABLE account owner must be mindful. • The account is limited to a maximum balance of $100,000. If you exceed that figure, SSI benefits would be suspended but not terminated. In addition, the federal maximum does not impact Medicaid, but states are free to create their own limitations for Medicaid coverage. • You can only fund the account with the annual gift tax exclusion (currently $14,000) per year, so it will take some time to reach the $100,000 maximum allowed. • Eligible expenses that are used by ABLE Act funds are required to be “qualified disability expenses.” This language is still being clarified by the Department of Treasury and the IRS. • Each eligible person gets just one ABLE account. The $14,000 current limit applies to all contributors, including family and friends. TION LENS A L S I G E L • The account is required to be established in your state of residence or the state that contracted for ABLE. Some smaller states may have other states administer and offer the ABLE accounts. • Investment selection will be limited. • Amounts left over after the death of the owner are subject to Medicaid payback so that what was paid out in benefits to the owner under medical assistance would be paid back before the remaining proceeds could be distributed to designated beneficiaries. So, how might this work in real life? Each state is responsible for instituting and operating an ABLE program. States will need to create their own procedures and forms. The Treasury Department must develop regulations that guide the states. When your state announces that the program is up and ready, the qualified disabled person can open an account. Having an ABLE account is not a replacement for a Third Party Special Needs Trust (SNT). When a parent, relative or friend leaves assets to a disabled person, it should be paid into an SNT and not the ABLE account. Why? 1. The Third Party Special Needs Trust is not subject to the Medicaid pay-back provision. 2. The Third Party Special Needs Trust is not subject to the $14,000 annual cap. 3. The Third Party Special Needs Trust is not subject to the $100,000 account limitation. What the ABLE Act does do is treat a disabled person like every other American. They, too, can open up a savings account. They, too, can quickly and inexpensively shelter small sums of money they receive and still preserve needed public benefits. They, too, can participate in annual estate plan gifting from their parents and grandparents. In conclusion, the ABLE Act is not perfect, but it provides disabled individuals a means to meet their daily needs like everyone else and still maintain the public assistance they need to remain independent and free. Edward Zetlin has a solo practice in the areas of elder & disability law, guardianship/conservatorship, public benefits, estate planning and estate administration. He serves on the Northern Virginia Autism Association Board and is an Adjunct Professor of Law at the Washington College of Law of American University. Mark Friese is the founder of Special Needs Financial Advisors, based in Washington, D.C. With over 100 years of combined experience, they help to navigate the many aspects of planning with special needs family members. ZOOM Autism through Many Lenses 45