Estate planning for those with special needs and those with loved ones who have special needs can be a particularly delicate process. To plan to provide support for someone with special needs requires careful planning due to the fact that he or she may rely on need-based government benefits such as SSI and Medicaid. A gift, inheritance, or any additional income could result in the loss of these benefits. Since having assets and savings can actually end up penalizing individuals with special needs, there is little to no incentive for them to have any kind of savings. That is until the establishment of ABLE accounts.
What is an ABLE Account?
Florida is responsible for establishing one of the first ABLE programs in the nation. The program is called ABLE United and it is for Florida residents with special needs. In essence, ABLE accounts are bank accounts that permit special needs individuals to have savings without risking the loss of disability benefits. While ABLE accounts were created at the federal level under the ABLE (Achieving a Better Life Experience) Act, the accounts themselves are both established and managed at the state level.
Individuals with special needs must demonstrate that they lack the necessary financial resources to support themselves when they apply for many government benefit programs. Money a person may have in a traditional bank account would work against them when applying. This is unfortunate because, while government aid provides critical financial resources for individuals with special needs, these individuals must live on very little money if they rely only on government program funds.
A special needs trust is one way that will allow an individual with special needs to have some supplemental income and remain eligible for need-based government benefit programs. An ABLE account is another way. There are, however, annual contribution limits on ABLE accounts. For 2020, the amount is capped at $15,000. Furthermore, for those qualifying for SSI, the ABLE account balance cannot exceed $100,000.
While anyone can contribute to an ABLE account, the individual who holds the account and benefits from the account must have had a disabling condition that was established prior to age 26. There is also a limit to how the funds may be used. ABLE account funds must be used for Qualified Disability Expenses (QDE). Failure to properly use account funds will result in taxation. The income generated from funds held in the account is not taxed. Account contributions are made with post-tax money.
Estate Planning Attorney
Do you have a loved one with special needs? Are you or a loved one receiving government disability benefits, but want a way to supplement them with savings? There are tools out there to help you, but they need to be properly utilized and executed. The team at Verras Law is here to put legal protections in place for you and your loved ones that will serve and support your goals. Contact Verras Law today.