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.”

SSI’s Thorny Rules for “Deeming” a Parent’s Income to a Child

Supplemental Security Income (SSI) is a federal program that helps people with disabilities and very low incomes pay for food, clothing and shelter. But even more valuable than the SSI benefit itself is that, in most states, a beneficiary who receives even $1 from the program also qualifies for Medicaid health coverage.

To qualify for SSI benefits, the beneficiary’s income and assets cannot exceed certain limits. But the Social Security Administration (SSA) doesn’t look at just the child’s income and assets, but also may consider a portion of the parent’s income and assets as if they were available to the child. This is called “deeming.”

The logic behind the deeming rule is that parents have a legal duty to support their child, and because parents’ income and assets would be legally available to support that minor child, their income and assets may be factored in the determination of the child’s needs for purposes of SSI eligibility.

Unmarried children under the age of 18 seeking SSI benefits may be deemed with the income and assets of any parent with whom the child lives, and even a stepparent if the stepparent and parent live together. If the parents are divorced and the child lives with only one parent, the child is not deemed with the income or assets of the parent living in another household. If a parent receives her own SSI benefits, or if the child does not live with either parent — for example, a child lives with a stepparent or grandparents and no parent lives in the home — there is no parental deeming. The amount of deeming to the child is reduced if the child is living in a household with other children under the age of 21. Once a child reaches the age of 18, even if she is living with a parent, deeming of parental income ceases and only the child’s own income and assets are counted in determining SSI eligibility.

The SSA defines “income” as both “earned” income, like wages, and “unearned” income, like retirement and investment income, unemployment benefits, and gifts. Importantly, Social Security benefits are counted as unearned income. For example, in 2017 a child with special needs living with one parent earning less than $3,065 a month in earned income would qualify for SSI. If all the parent’s income is unearned, the monthly income limit would be $1,510. “Income” also includes non-cash items such as the value of food and housing one receives from others. These are more commonly known as “in-kind” items of income, and are considered unearned income.

Assets, or what SSA refers to as “resources,” include things like bank accounts, cash on hand, and investments. However, not all assets are counted. For example, a parent’s home, automobile, and most retirement accounts are excluded from counting. But while a retirement account itself may not be counted, any payment from the account to the parent is countable income and thus subject to being deemed to the child.

The calculation of the deeming of income is complex. The living arrangement of the child makes all the difference and it is not one-size-fits-all. SSA provides an annually updated Deeming Chart to help families make this calculation. However, there are many exceptions that would cause the chart not to apply to a particular family’s situation, one exception being if the family has a mix of earned and unearned income, which many do. A family’s best resource is the procedure, or formula, that SSA uses in the deeming calculation, and this can be found on SSA’s website.

If you have a minor child with special needs, SSI benefits – and by extension, Medicaid coverage — may be available to your child. It may be worth crunching numbers and reviewing SSA’s charts and formulas to see if your child may qualify. And if your child is already receiving SSI benefits, it is important to understand the basic workings of these deeming rules so that you do not inadvertently jeopardize those benefits.

But, as you now realize if you have read through the above, the rules are complicated. Your special needs planner can help you sort through them and determine if your child might qualify for SSI.

Can the Beneficiary of a Special Needs Trust Change the Trustee?

The beneficiary of a special needs trust can never control or access trust funds – that is the job of the trustee. A common fear among beneficiaries or their families is that the trustee may not do what’s in the beneficiary’s best interests and that, if this happens, the beneficiary may not be able to do anything about it.

Choosing the right person to serve as trustee is one of the most important and difficult issues in creating a special needs trust. If you haven’t chosen wisely, problems can emerge. The trustee might be incompetent in administering the trust and thus jeopardize the beneficiary’s public benefits, be unresponsive to the beneficiary’s needs, or even take improper fees from the trust. Or, the beneficiary and the trustee simply might not get along. Can the beneficiary of a special needs trust do anything about the actions, or inactions, of the trustee?

The short answer is “yes.” First, the law generally charges a trustee of a special needs trust with the usual duties of any trustee, plus other specific obligations. Usually, the trustee has an affirmative duty to inquire into the needs and welfare of the beneficiary, to communicate with the beneficiary and other involved individuals, and to make certain that the beneficiary maintains eligibility for public benefit programs.

If the beneficiary has grounds to believe that the trustee is not acting according to the law, the beneficiary generally has the right to petition a court to remove the trustee and bring related actions to address the trustee’s conduct. Some states allow out-of-court ways to initiate a change of trustee. For example, in Pennsylvania, the beneficiary, or his or her representative, can draft a settlement agreement with the trustee to replace that trustee. As long as the change in trustee does not violate the essential purpose of the trust, the document is binding without going to court. However, these procedures, whether in or out of court, can be time-consuming and costly, and in some cases, merely “not getting along” with the trustee may not be enough to justify removal. Moreover, the beneficiary may not have the wherewithal to initiate the action or the legal capacity to do so. Generally, in court proceedings, the beneficiary must be able to understand what’s going on and assist in the legal representation.

To avoid these types of obstacles, a special needs planner may draft the trust document to include mechanisms for removing a trustee (including defining reasons for trustee removal). The trust can also include provisions for trustee resignation, the appointment of successor trustees, and the appointment of a “trust protector.” The trust protector is a person or entity chosen by the person setting up the trust to keep an eye on the trustee’s performance, usually with the right to remove the trustee and appoint a new one. Even though there is no need to anticipate trustee misconduct, appointing a trust protector is a recommended way to provide an extra level of protection to the beneficiary. However, the rights and procedures for changing trustees vary from state to state. Therefore, the best way to build in protections that allow for the replacement of a trustee gone bad is to consult with a qualified special needs planner.

Three facts about estate planning in Massachusetts that you should know

Estate planning in general means that you are engaging in financial planning focused on the laws of property, wills, and trusts. Here are three facts about Massachusetts law that you should know.

Estate Tax. Federal taxes levied against the deceased’s estate in Massachusetts are extremely high. The rate can be as steep as as 55%. Moreover, these taxes must be paid in cash. They must also generally be paid within nine months subsequent to the date of death.

However, preplanning your estate can lessen or even dismiss these taxes. Both the federal government and Massachusetts allow a certain amount—up to $1 million–to be tax free. The creation of an estate plan means that one can use allowed exemptions to reduce or eliminate large estate taxes, and protect one’s family from having to use cash and assets they have inherited to pay the tax. [Read more…]

How Elder Law Attorneys Assist Senior Citizens

As you and your loved ones get older, new situations will be encountered  that involve issues due to aging. You are not quite sure how to solve these problems. Where can you get advice? A good starting place is going to an attorney that specializes in elder law.

What is Elder Law?
Elder Law is a rapidly growing legal practice that assists senior citizens needing help and guidance with legal matters. It specifically focuses on older adults in areas such as estate planning, long-term care, medical directives, nursing home issues, and Medicaid.

Estate Planning
Your parents are aging. You want to encourage them to develop an estate plan. This is a type of advance planning to organize property and financial assets and put in writing what a person’s wishes are for their assets after they are deceased. It is a hard conversation to have with your parents, but will be very useful after they have passed.

Long Term Care
As you age, you may begin thinking about the possibility that you might need assistance in everyday living when you get older. Or maybe your loved ones need that type of help now. There are several options. [Read more…]

Elder Law: The Importance of Planning

A recent Boston Globe article reveals as many as 60% of Massachusetts nursing homes are finding ways to skirt a 2012 dementia care law intended to prevent deceptive practices. The law requires that facilities advertising dementia care must meet specific criteria including dementia-specific training for staff, specialized activities, and security measures to prevent wandering.

This story is just one of many that illustrate how important it is to do your homework and advocate for your loved one through estate planning and long term care planning. Our firm assists clients with all of their elder law concerns. Areas within elder law include:

  • Nursing Home Issues – Sadly, as our population ages, we see increased cases of abuse, neglect, and exploitation in nursing homes. An elder law attorney can help secure return of assets in a case of financial exploitation or recover damages for injuries resulting from neglect or abuse.
  • Medical Directives – Should you become incapacitated and unable to communicate your wishes, it’s imperative that you have medical directives in place. In Massachusetts, you will need a living will and health care proxy. An attorney can help you through this delicate process.

[Read more…]

Estate Planning and Future Healthcare Planning in Massachusetts Law

Though many people have the notion that estate planning is only for the rich, anyone who has earned money and done a good job of investing it can benefit from careful estate planning. Without a comprehensive estate plan, all the things that you have worked so hard for can be lost or given to unintended beneficiaries. Since estate law varies from state to state, it is wise to consult with an attorney well-versed in Massachusetts law to make a solid plan for the future of your assets.

There are many ways to protect your assets for those you love by means of an effective estate plan. Your attorney can help you draft a will in which you can specify how your assets should be distributed at the time of your death.  Wills can also designate legal guardians for your children in the event they are still minors or are incompetent. Funeral and burial requests can also be included.  A Massachusetts attorney can help you draft a will that will stand even in the event that someone should contest the will in court. [Read more…]

A very good choice

Hiring Mr. Sharry was a good choice for me regarding my Social Security Disability case. He is very well versed in all aspects of SSDI. He was very responsive when I called him. He returns calls promptly which meant a lot to me.

by Brian