Five Practical Uses for an ABLE Account

We have previously written about the pros and cons of ABLE (Achieving a Better Life Experience Act of 2014) accounts. These accounts allow many people with disabilities or their families to establish tax-free savings accounts that won’t affect their ability to qualify for, or remain on, government assistance as long as the account balance does not exceed $100,000. But ABLE accounts can be more than simply a savings vehicle.  The accounts can be used in many creative ways, either alone or in conjunction with other planning tools, to make a big difference to families with special needs children.

Any adult child with special needs who owns more than $2,000 in countable assets is generally ineligible for many public benefits programs, including Medicaid and Supplemental Security Income (SSI). But because an ABLE account with a balance below $100,000 is not counted as a resource for most public benefits programs, the account provides an opportunity for planning to ensure that the child does not become ineligible because of wages, gifts, or other sources of funds that may become available to her.  Here are five practical uses for an ABLE account that could have a significant impact on a beneficiary’s quality of life:

Protecting UGMA/UTMA account funds: Does your child have a savings account in his or her own name? Perhaps gifts from family over the years were deposited into the child’s account? Such an account is often known as an “UGMA (or UTMA) account,” named after the Uniform Gifts (or Transfers) to Minors Act, the law that governs bank accounts owned by minors.

When the child becomes an adult, that bank account will  suddenly be counted as a resource for purposes of determining eligibility for many public benefits programs. One practical use of an ABLE account is as a repository for money from an UGMA/UTMA account of a child who is coming of age so that it will not be counted in determining her continued eligibility for public benefits.

Shielding income: Another practical use for an ABLE account is as a receptacle for child support, alimony, or even earned wages. Using an ABLE account for sources of income such as these shields them from being counted as a resource of the child. If more than $2,000 is accumulated by the child over time in an ABLE account, the eligibility for government programs is protected. In addition, an ABLE account is flexible enough that payments deposited into an account can easily be used to pay for many of the expenses a child may have.

Substituting for a special needs trust: An ABLE account can play a beneficial role if your child is expecting to receive a small settlement or award, or even an inheritance or gift.  In some cases, an ABLE account may even make it unnecessary to go through the time and expense of creating a special needs trust. Here’s how this might work for a child receiving, say, a a $150,000 settlement. Although no more than $15,000 can be deposited into an ABLE account each year, and an individual can have only one ABLE account, there are still options. The child could transfer $15,000 into her ABLE account, and a structured annuity could be purchased with the remaining $136,000 that would fund the ABLE account for a certain amount each month so that the total deposited into the account each year would not exceed $15,000.  In this way, a complex special needs trust could be avoided.

Giving the child financial control: Perhaps the most important practical use of an ABLE account is that it can be managed and controlled by the child. If a special needs trust were used, a trustee would be required to approve each and every expenditure.  Instead, an ABLE account gives the child access to money that she alone can decide how to spend, which, in turn, can provide a boost in self-esteem because the child is in a position to make these financial decisions herself. This autonomy also allows the child to make decisions on saving money. Through an ABLE account, the child can decide whether or not to save money for such things as a home, a car, or even a wedding.

Paying household expenses: Another beneficial use of an ABLE account is using it to pay for utilities and other housing expenses without triggering SSI’s “in-kind support and maintenance” (or ISM) penalty that would otherwise be incurred if a third party, including a special needs trust, made the same expenditure. When it comes to  its ISM rules, the Social Security Administration views money in an ABLE account as if it were the SSI beneficiary’s money, so there is no penalty when the recipient of a government benefit uses her own funds from an ABLE account to pay for her own housing expenses.

When it comes to planning for your child’s needs, it is important not only to consider the advantages of an ABLE account standing alone, but also to realize that an ABLE account can be used in conjunction with other planning tools, such as a special needs trust, to craft a strategy that best fits your child’s needs now and in the future. Even as just one piece of a larger puzzle, an ABLE account may be able to offer so much more to your child.

To find out how an ABLE account might benefit your child with special needs, contact your special needs planner.

 

How to Earn Additional Income Without Losing SSI Benefits

Although Supplemental Security Income (SSI) recipients are subject to rigid asset limits, the federal government has provided a few avenues for beneficiaries to earn income that supplements their SSI benefit.

The Social Security Act imposes a $2,000 asset limit on SSI beneficiaries, a figure that has remained frozen since 1989. For couples, the limit is $3,000.  For 2018, the maximum monthly SSI benefit is $750, although many states provide a further supplement.

However, the Social Security Administration (SSA) will not necessarily reduce the SSI benefit based on additional income. For each dollar earned above the monthly maximum amount, the SSA reduces the person’s monthly benefit by $0.50.  However, the SSA excludes a person’s first $85 in monthly earned income. Furthermore, SSI beneficiaries under age 22 or enrolled in school or a vocational training program can earn up to $1,790 in monthly income (up to $7,200 annually) without jeopardizing their SSI benefit or eligibility.

For other SSI beneficiaries looking to enter the workforce or return to work, the Plan for Achieving Self-Support (PASS) program may be an option for covering costs associated with job training or starting a business. Candidates for the program must submit applications to the SSA that detail their work goals, specify requested items and services and provide cost estimates, among other requirements.

If the SSA terminates a person’s benefits due to excessive earnings, an expedited recertification option exists for people who reapply within five years.

Another option for SSI recipients is the Ticket to Work program. The purpose of this program, which is available to both SSI and Social Security Disability Insurance (SSDI) recipients, is to provide a trial work period for beneficiaries without losing benefits.

Under this program, SSI beneficiaries can make more than $840 a month for nine months before their benefits are cut off. The nine months can either be consecutive or spread over a five-year period.

Assuming earnings continue after the trial period, benefits are cut off. But if a person’s earnings fall below this amount during the three years succeeding the trial period, benefits can be immediately restored.

For more information, click here to read the SSA’s pamphlet “Working While Disabled: How We Can Help.”

Should You Have a Care Committee in Your Special Needs Trust?


Most special needs trusts give their trustee wide authority, often appropriately so, to respond to unforeseen circumstances. But for those concerned about placing some checks and balances on the trustee’s authority, one possible option is a care committee.

Special needs trusts are trusts designed to protect the assets of a person with disabilities. The trustee is the person tasked with managing and distributing the trust’s assets on the beneficiaries’ behalf.

As previously discussed here, in addition to the trustee, many trusts create a separate care committee, either explicitly in the trust or through a separate memorandum of intent. Care committees, also commonly known as “trust advisory committees,” are typically granted the right to review accountings, to examine records, and to remove and replace the trustee.  To use an analogy from the corporate world, the trustee is the CEO and the care committee is the board of directors. The care committee may also be given the authority to amend the trust, veto certain distributions or participate in other decisions.

A downside to the creation of a care committee is that it can slow down the decision making process, at the expense of the beneficiary. Likewise, a care committee can deny the trustee the appropriate flexibility to act in the person with disability’s best interests.

To see if a care committee is right for your special needs trust, contact your special needs planner.

How Does Workers’ Comp Affect SSDI Benefits?

Some people become disabled as the result of a work-related illness or injury. In these cases, the individual may be eligible for both Social Security Disability Insurance (SSDI) and workers’ compensation benefits. Unfortunately, their total benefits may be limited by what is known as the “workers’ compensation offset.”

Key to understanding the interplay between the two programs is to understand their separate purposes. Workers’ comp programs, which are run at the state level, seek to compensate workers who suffer job-related illnesses or injuries. SSDI is a federal program that compensates people with sufficient work histories who are considered unemployable due to their disabilities, regardless of any connection between their work and the disability.

Not all people who qualify for workers’ comp will also be eligible for SSDI, which sets a strict eligibility standard. Specifically, the Social Security Administration (SSA) defines disability for SSDI purposes as “the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment(s) which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.”

Workers’ comp eligibility standards are more flexible. In New York State, for example, workers’ comp beneficiaries can be deemed to have total or partial disabilities, and either of these can be classified as permanent or temporary.

Since monthly benefits tend to be significantly higher under workers’ comp, the Social Security Administration (SSA) imposes a cap on SSDI payments when people receive both types of benefits.

Under the “workers’ compensation offset,” created by Congress in 1965, the total amount from SSDI and workers’ comp cannot exceed 80 percent of the person’s “average current earning,” or the total SSDI received by the recipient’s entire family during the first month receiving workers’ comp, whichever is higher. In most cases, the former is higher.

Here’s an example of how the offset works: Before she became disabled, Sally’s average earnings were $4,000 a month. Sally is eligible to receive a total of $2,200 a month in SSDI benefits. Sally also receives $2,000 a month from workers’ compensation. Because the total amount of benefits she would receive ($4,200) is more than 80 percent ($3,200) of her average current earnings ($4,000), her SSDI benefits will be reduced by $1,000 ($4,200 – $3,200).

The SSA calculates “average current earnings” based on the highest monthly earnings under one of three formulas.

  • The average monthly wage used for determining the SSDI amount
  • The average monthly wage based on the person’s five highest earning years in a row
  • The average monthly wage based on the single year that the person’s disability began or any one of the five previous years

Some workers’ compensation claimants receive a lump-sum payment in addition to, or instead of, a monthly benefit. These payments may also reduce the amount of SSDI received, although attorneys will try to draft settlement agreements to minimize the workers’ comp offset.

While in most states, the workers’ compensation offset works to reduce the person’s SSDI, 16 states have adopted a “reverse offset” program. In these states, the person’s workers’ comp, rather than their SSDI benefit, will be reduced to meet the SSA’s prescribed formulas.

To read the SSA’s guide “How Workers’ Compensation and Other Disability Payments May Affect Your Benefits,” click here.

 

Do I Qualify For Disability With Pervasive Developmental Disorder (PDD-NOS)

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PDD-NOS stands for Pervasive Developmental Disorder-Not Otherwise Specified (PDD-NOS). PDD-NOS was one of several autism diagnoses that are now included in the overall diagnosis of autism spectrum disorder (ASD) with the publication of the DSM-V.

In the DSM-IV, the essential features of PDD-NOS are severe and pervasive impairment in the development of reciprocal social interaction or verbal and nonverbal communication skills; and stereotyped behaviors, interests, and activities. The criteria for Autistic Disorder are not met because of late age onset; atypical and/or sub- threshold symptomotology are present.

You may meet the criteria for disability if you meet the requirements of one of Social Security’s official disability listings.  Social Security publishes the criteria for a number of common illnesses to qualify for disability, and if you meet the criteria for your particular condition, you automatically qualify for benefits.

The listing for Autism Spectrum Disorders for adults is 12.10:

12.10 Autism spectrum disorder (see 12.00B8), satisfied by A and B:

  1. Medical documentation of both of the following:
    1. Qualitative deficits in verbal communication, nonverbal communication, and social interaction; and
    2. Significantly restricted, repetitive patterns of behavior, interests, or activities.

AND

  1. Extreme limitation of one, or marked limitation of two, of the following areas of mental functioning (see 12.00F):
    1. Understand, remember, or apply information (see 12.00E1).
    2. Interact with others (see 12.00E2).
    3. Concentrate, persist, or maintain pace (see 12.00E3).
    4. Adapt or manage oneself (see 12.00E4).

The listing for Autism Spectrum Disorders for children is 112.10:

112.10 Autism spectrum disorder (see 112.00B8), for children age 3 to attainment of age 18), satisfied by A and B:

  1. Medical documentation of both of the following:
    1. Qualitative deficits in verbal communication, nonverbal communication, and social interaction; and
    2. Significantly restricted, repetitive patterns of behavior, interests, or activities.

AND

  1. Extreme limitation of one, or marked limitation of two, of the following areas of mental functioning (see 112.00F):
    1. Understand, remember, or apply information (see 112.00E1).
    2. Interact with others (see 112.00E2).
    3. Concentrate, persist, or maintain pace (see 112.00E3).
    4. Adapt or manage oneself (see 112.00E4).

If you do not meet the listing, you may still qualify for disability benefits if you are not performing substantial gainful activity and if the impairment prevents you from doing your past relevant work or other work that exists in significant numbers in the national economy.

For children, to functionally equal the listings, an impairment(s) must be of listing-level severity; that is, it must result in “marked” limitations in two domains of functioning or an “extreme” limitation in one domain.  Domains are broad areas of functioning intended to capture all of what a child can or cannot do. SSA uses the following six domains:

  1. Acquiring and using information,
  2. Attending and completing tasks,
  3. Interacting and relating with others,
  4. Moving about and manipulating objects,
  5. Caring for yourself, and
  6. Health and physical well-being.

Please call our office at (508) 421-4610 if you have any questions about applying for disability with Pervasive Developmental Disorder (PDD-NOS) or the application process in general.

 

How Do You Apply For Social Security Disability?

The basic steps you need to know when applying for Social Security Disability

How Does the SSA Calculate Cost of Living Increases?

Next year, Social Security recipients will see a 2 percent raise in benefits, the largest increase in six years.

For Social Security Disability Insurance (SSDI) recipients, the average monthly benefit will go up from $1,170 to $1,180, not including people who are blind, for whom the monthly rate is significantly higher. For Supplemental Security Income (SSI) beneficiaries, the average monthly benefit will rise from $735 to $750.

But how does the Social Security Administration (SSA) calculate its annual cost of living adjustment (COLA)?

The answer is a seemingly arbitrary measure of inflation, long criticized by advocates for the elderly and people with disabilities as unrepresentative of the spending patterns of Social Security beneficiaries.

Each month, the Bureau of Labor Statistics (BLS) publishes a variety of different measures of inflation, each of which are tailored to reflect the impact of price changes on different population groups.

The SSA, when calculating its annual COLA, relies on a measure of inflation known as Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Adopted by the SSA in 1975, this Index attempts to measure inflation based on the spending patterns of people living in 1) urban households, 2) for whom at least half of the household’s income comes from clerical or wage occupations, and 3) one of the household earners must have been employed for at least 37 weeks during the previous 12 months.

According to the BLS, only about 28 percent of the total U.S. population falls into households that meet this criteria. As very few of these households contain individuals receiving Social Security benefits, it is unclear why the CPI-W is the SSA’s preferred measure of inflation. Many advocates contend that the CPI-W doesn’t rise quickly enough to reflect the spending patterns of SSI and SSDI beneficiaries.

Ironically, the BLS has constructed – but does not yet use for the COLA – a separate index for measuring inflation for the elderly that tends to record higher rates of inflation, primarily due to increased medical costs. As such, this index also would likely better reflect the economic realities for SSI and SSDI beneficiaries. The BLS, however, warns that this separate index for the elderly is currently experimental, and should be treated with caution.

Despite widespread criticism of the SSA’s reliance on the CPI-W, most legislation in recent years has been focused on pushing the SSA to adopt an even stricter form of inflation measurement.

The Obama Administration, in both 2013 and 2014, and numerous Republican budget proposals, including the most recent one in the House, have pushed for a new measure known as the “chained CPI.” This measure attempts to calculate how people compensate for increased costs via substitution, i.e., buying one product instead of another. Annual inflation is typically measured as between 0.25 to 0.35 percent less under this measure, according to the New Republic.

The Social Security COLA went up just 0.3 percent for 2017 and not at all for 2016. Next year’s increase is primarily the result of recent boosts in energy and food prices.

For more on how the SSA calculates COLAs, click here.

Click here for frequently asked questions about the CPI-W.

Annual Contribution Limit for ABLE Accounts to Rise in 2018

The amount that can be deposited in an ABLE account each year without jeopardizing public benefits will rise from the current $14,000 to $15,000 starting in 2018.

The increase makes these accounts that much more attractive as a way for people with disabilities to shield gifts or income or even use as an alternative to a special needs trust in the right circumstances. The amount that can be deposited in an ABLE account is tied to the federal gift tax exclusion, which will rise from $14,000 to $15,000 in 2018 due to inflation.

Created by Congress via the passage of the Achieving a Better Life Experience (ABLE) Act in 2014 and modeled after popular 529 college savings accounts, ABLE accounts allow people with disabilities and their families to save up to $100,00.00 in accounts for disability related expenses without jeopardizing their eligibility for Medicaid, Supplemental Security Income (SSI), and other government benefits.  Funds in the tax-free savings accounts can be used to pay for qualifying expenses such as the costs of treating the disability or for education, housing and health care, among other things. ABLE accounts may be opened by anyone with a disability as long as the disability began before the person turned 26.

Like the 529 savings plans on which they are patterned, ABLE programs are set up by the individual states, although so far most state plans are welcoming the participation of residents of any state.  Twenty-nine states and the District of Columbia now have ABLE programs, according to the ABLE Resource Center.

Thank you!

Thank you to the special needs department at the JCC Springfield for the opportunity to speak about special needs planning.  I appreciate the invitation and opportunity to present.  We discussed special needs trusts, Social Security Disability, ABLE accounts, guardianships, financial strategies and other special needs planning topics.  Thank you to the many families that attended and all of the great questions.  Thank  you again for hosting our workshop!

Who May Open an ABLE Account?

ABLE accounts are a great new savings tool for individuals with disabilities, but not all people with disabilities are eligible to open these accounts. The rules for determining eligibility are for the most part uncomplicated, although one requirement is proving controversial.

Created by Congress via the passage of the Achieving a Better Life Experience (ABLE) Act in 2014 and modeled after popular 529 college savings accounts, ABLE accounts allow people with disabilities and their families to save up to $100,00.00 for disability related expenses without jeopardizing their eligibility for Medicaid, Supplemental Security Income (SSI), and other government benefits.

Under the ABLE Act, two categories of people are eligible to set up accounts. The first category is straightforward: If you are a recipient of SSI and Social Security Disability Insurance (SSDI), you are automatically eligible because you have already been determined to to be “disabled.”

The second category is for people ineligible for these programs, either because they have too much income or assets, in the case of SSI, or they lack a work history, in the case of SSDI. These individuals must obtain a certification, from a licensed physician, attesting that they meet the Social Security Act’s disability definition, which is as follows:

“The individual has a medically determinable physical or mental impairment, which results in marked and severe functional limitations, and which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, or is blind . . .”

The actual legislation provides almost no further guidance concerning these disability certifications. However, in subsequent proposed regulations released in June 2015, the Internal Revenue Service (IRS) elaborated that certifications must state the person’s diagnosis, detail the limitations on the person’s daily living activities, and certify that the disability began before the person turned 26. So, to be clear, ABLE account holders can be older than age 26, but they must have first experienced their disability before their 26th birthday.

This latter requirement — which also applies for SSI and SSDI beneficiaries who wish to open ABLE accounts — is perhaps the law’s most controversial element. For many disability advocates, reforming this provision has become a top legislative priority. Versions of the ABLE Age Adjustment Act, a bill to raise the age from 26 to 46, have been introduced in both the Senate and House each of the past two legislative sessions.

After the Senate Finance Committee passed two unrelated ABLE reform bills in October 2016, a coalition of 82 disability rights groups wrote a letter to senators opposing the bills’ passage if the ABLE Age Adjustment Act wasn’t included in the package. As a result, none of the three ABLE reform bills has yet passed.

The IRS regulations also provide further guidance on situations where a person’s eligibility changes, such as when the person’s disability no longer exists, or disappears but later resurfaces. These regulations have not been finalized and thus are not legally binding, although the IRS has stated that “[u]ntil the issuance of final regulations, taxpayers and qualified ABLE programs may rely on these proposed regulations.”