Congress Considering Raising ABLE Account Age Threshold

In prior blog posts I told you about the ABLE (Achieving a Better Life Experience) Act. The 2014 legislation allows individuals with qualifying disabilities to save in tax-advantaged accounts. The main advantage of the account is that it allows eligible individuals to possess over $2,000 in assets, yet still qualify for means-tested federal benefits such as Medicaid and SSDI. Prior to this legislation, individuals dependent on these important federal programs had to keep their assets under $2,000, effectively impoverished, to qualify for these benefits. 

Also, one of the rules is that the beneficiary of an ABLE account must have developed his/her disability before age of 26. Since the introduction of the legislation, public pressure has mounted to raise the age of onset. Raising the age limit would allow those who have developed chronic debilitating medical conditions after that age, or those who have been disabled as a result of accidents sustained after that age, to open an ABLE account.

To remedy this problem, the "ABLE Age Adjustment Act" (Senate Bill 817) has been introduced in Congress. If passed, it will raise the threshold for disability onset from age 26 to age 46. You can read more about the bill and follow its progress by clicking here.


For details on how ABLE accounts work, see my prior blog post here. Read about the Florida ABLE program here.

ABLE Act allows people with disabilities to save and still keep government benefits

The recently passed ABLE Act ("Achieving a Better Life Experience") amends section 529 of the IRS code, allowing people with disabilities to save for the future and remain eligible for means-tested federal benefits. Prior to passage, special needs individuals who accumulated over $2,000 in assets would lost vital benefits such as Medicaid and SSI. Under the new ABLE act, these people will no longer be forced to keep themselves effectively impoverished.

The law allows for the establishment of tax-advantaged savings accounts for the benefit of a disabled individual. The funds in an ABLE account, just like the funds in a Special Needs Trust, may be used only for those services and items not provided by the government, for example, special therapies, housing, transportation, job training, assistive technologies, etc. Any number of people may contribute to the account, but a disabled individual may have only one such account. The accounts do have certain limitations, though:

• Any amount in excess of $100,000 in the account may cause a reduction in government benefits.

• No more than $14,000 may be deposited into the account annually.

• The beneficiary's disability must have developed before the beneficiary reached the age of 26.

• Upon the death of the beneficiary, the funds in the account must be used to repay Medicaid.

Given its limitations, the ABLE account can serve as an adjunct to, rather than a substitute, for a special needs trust or pooled trust. 

The accounts will become available when each state works out its administrative apparatus to comply with the new law.

Advantages of setting up your child's Special Needs Trust right now

When a special needs child turns 18, any monies in his/her name will be considered a countable asset when determining eligibility for SSI, Medicaid, and other government benefits. Most parents understand the importance of setting up a Special Needs Trust (SNT) to protect the child's eligibility for these critical government benefits, and to enhance the child's lifestyle and welfare. However, many parents fail to understand that it is advantageous to set up an SNT as soon as possible. It is not necessary to wait to establish the SNT until the child turns 18, or even until funds are available to place in the trust. 

Once the parent has set up the SNT, the parents can name the trust as one (or sole) death beneficiary of his/her life insurance policy and other assets, such as a pension. Of course, parents can also transfer funds into the trust while they are alive, naming themselves as trustees, and naming successor trustees for the point at which they can no longer serve due to death or incapacity.

Chances are grandparents and other family members would also like to contribute to the child's present and future welfare and maintenance. Rather than each relative having to set up his/her own SNT for the child, the one SNT the parent creates can be the one legal depository to which everyone can contribute. Just like the parents, relatives can either transfer funds into the SNT while they are alive, or upon their death by naming the SNT a beneficiary in their will or trust.

A Special Needs Trust is an extraordinarily complicated instrument. You want the best for your disabled loved one, so this is an area in which "penny wise, pound foolish" can be truly disastrous. Contact our Florida estate planning/elder law attorneys for guidance.

Proposed law would enable veterans to leave funds to disabled child in special needs trust

Shouldn't military veterans have the same estate planning options as their civilian counterparts? Unfortunately, as I posted here last year, in one important area they do not. 

Under current law, a military retiree can put aside up to 55% of his monthly pension to be distributed in the form of a stipend to his/her survivors when he passes away. A veteran may leave the benefits to his/her disabled child, but must leave it directly to the child. The funds may not be left in trust for the child. The effective result: The child will likely lose essential government benefits that are means-tested, such as Social  Security disability and Medicaid. In most cases, those benefits are what will keep a disabled child from falling into poverty. 

On the other hand, non-military personnel enjoy the right to leave their benefits in a special needs trust for the benefit of their disabled child. The funds in the special needs trust may be used to provide supplemental services to the child such as transportation, equipment, special therapies, etc. Since the funds are in a special needs trust and not directly accessed by the beneficiary, the child does not lose his/her eligibility for government benefits. Read more about Special Needs Trusts.

The Disabled Military Child Protection Act has been introduced in Congress to right this wrong and enable a veteran to put the funds in a special needs trust to benefit a disabled child. The House version is H.R.2249; the Senate version is  S.1076. The legislation has widespread support from many organizations, and you can add your support by contacting your representatives in Congress: 

Find your representative in the U.S. House of Representatives. 

Find your senator in the U.S. Senate.

New bill would help special needs children of military retirees

If it becomes law, a new bill introduced in the U.S. House of Representatives will provide greater financial security to special needs children of retired military personnel. House Bill 4329, The Disabled Military Child Protection Act, would allow military retirees who participate in the Survivor Benefit Plan to ultimately place these funds in a Special Needs Trust for their child's benefit. The bill was introduced last month by Congressman Jim Moran (D-Virginia),

Under the existing system, a military retiree can put aside up to 55% of his monthly pension to be distributed in the form of a stipend to his survivors when he passes away. However, that stipend could disqualify a a child from receiving Social Security Disability and/or Medicaid benefits, since the government counts the stipend as income. Under the proposed law, military retirees participating in the Survivor Benefit Plan could have their retirement benefits transferred upon death to a Special Needs Trust for the benefit of a disabled child. Since the Special Needs Trust pays only for the beneficiary's supplemental care, the child's other government benefits would not be jeopardized.

Read more about The Disabled Military Child Protection Act. 

Read more about Special Needs Trusts.

Autism and the Affordable Care Act

Yesterday the Supreme Court wrapped up arguments on the constitutionality of the Affordable Care Act. The nation awaits the court's decision, likely to be handed down in June. The stakes are high for everyone, but especially for the many families whose children are disabled. These families have already benefited from the law's requirement that insurance companies may not deny health coverage to a child based on the child's "pre-existing condition."  Obviously, striking down the Affordable Care Act would pull the financial rug out from under these families.

   

Ironically, today the Centers for Disease Control released its latest statistics on autism. The findings: The incidence of autism is now one in 88 children -  TWICE the 2002 estimate. More children will be diagnosed with autism this year than with AIDS, diabetes and cancer combined. This sobering statistic follows the recent release of a University of Pennsylvania study showing that the typical mother of an autistic child earns 35% less than the mother of a child with any other kind of disability, and 56% less than one whose child  has no discernible disabilities.  The report attributes the gap to the fragmentation of support services for children with autism, requiring parents to not only provide direct care to the child, but to spend enormous amount of time and energy that must be spent navigating medical, educational and other bureaucracies.

One bright spot for Florida families who do not have private health insurance: This week the U.S. District Court ruled that Medicaid must provide behavioral therapy for children with autism. The Florida Agency for Health Care Administration had argued that it was not obliged to cover this service because it is an experimental therapy. Commercial insurance carriers are already required to pay for this type of therapy.  

Of course, specialized and sophisticated estate planning is required for children with significant disabilities. This ensures that the financial resources and proper legal framework  are there for the child now, and into the future.  A Special Needs Trust should be the legal linchpin of your planning. Find out more about Special Needs Trusts.

ABLE would provide help to parents of special needs children

Caring for a child with a serious disability has its rewards, and of course, its emotional and financial challenges. A bill introduced in Congress last year aims to help ease the financial  concerns. The Achieving a Better Life Experience Act, or ABLE for short, would allow families to establish tax-exempt accounts for the benefit of their youngsters, similar to the 529 accounts parents establish to save for a child's college education. The accounts would cover disability-related expenses such as transportation, housing, education, therapies and assistive technologies that help a special needs individual to live independently.  The accounts would not supplant government assistance such as Medicaid and SSI but simply supplement it. 

To learn more about ABLE, and to sign a petition urging your elected officials to support it, click here. 

Staff helps young bowlers at Special Olympics

Karp Law Firm staffers assisted young bowlers at the Special Olympics Bowling Classic on Sept. 10.  Youngsters with varying disabilities were cheered on by "Karp's Kommandos," who also helped them bowl and made sure everyone got their turn. The event was sponsored by Special Olympics of Palm Beach County, Florida and held at the Strike Zone in Lake Worth. Special thanks to our own Khristina Iwasz, who organized our participation. Volunteers included Attorney Joseph Karp and his son, Jonathan: Attorney Genny Bernstein; Estate Planning Paralegals Khristina Iwasz and Vicki Kulig; Estate Administration Paralegal Gail Brown and husband John; Assistant Case Manager Jenny Ramirez; Firm Administrator Audrey Yeager; and Office Coordinator Liz Lebron.

For more on how our law firm can help parents plan for a secure future for their special needs children, click here.

Jenny Ramirez and friend

Joseph Karp making sure everyone gets their turn

Genny Bernstein and Khristina Iwasz at the bowling lanes with youngsters

Liz Lebron cheers on her group

Take Care of Your Loved One with Special Needs... Now!

This article was posted originally by the Academy of Special Needs Planners on 2/2/11. Although this is a true story that occurs in New Jersey, it could as easily happen in Florida!

Have you been thinking of meeting with a special needs planner to put a plan in place for a child or loved one but you just haven't made the call? Or have you already met with an attorney and not finalized your plan, even though you swore you would get to it yesterday? If either of these examples sounds like you, then a recent case from New Jersey should make you think twice about waiting to finalize that estate plan that you have been putting off.

Margaret Flood had four children, including two daughters with special needs who received government benefits. Concerned about leaving an inheritance directly to the daughters with special needs, and thus cause them to lose their benefits, Ms. Flood consulted with an attorney about the possibility of creating a special needs trusts for them. However, Ms. Flood did not follow up with her attorney after the initial meeting, and time passed.

Tragically, Ms. Flood passed away before finalizing her plan. Because she died without a will of any kind, Ms. Flood's property became subject to New Jersey's intestacy law. An intestacy law is a state statute that dictates who will receive your property if you die without a will (some property, like retirement accounts and jointly owned property, passes outside of this system). Under New Jersey's law, Ms. Flood's $480,000 estate passed in equal shares directly to all four children, including the two daughters who could not receive funds without compromising their vital government benefits.

The administrator of Ms. Flood's estate attempted to undo the damage by filing an action in court seeking to create and fund two special needs trusts to hold the inheritances for Ms. Flood's daughters with special needs. The administrator argued that it was Ms. Flood's intent to create the trusts, and since her intent was clear, the court should put her probable plan into effect and preserve her daughters' benefits. This legal theory is sometimes used when a will or a trust is unclear and needs to be reformed after the fact in order for the instrument to function as its creator intended. In this case, the court allowed the administrator to establish the special needs trusts even though Ms. Flood had no will at all.

But Ms. Flood's heirs would run out of luck when the case was appealed to the Appellate Division of the Superior Court of New Jersey. That court reversed the lower court's decision and prevented the funds from flowing into the special needs trusts for Ms. Flood's daughters. The appellate court ruled that the trial court overstepped its bounds by bypassing the intestacy laws, and it further ruled that under New Jersey law, there was no option -- Ms. Flood's daughters must receive their inheritance directly, regardless of the effect that might have on their government benefits.

Ms. Flood tried to do the right thing and simply ran out of time to put a plan in action. Don't let this happen to you; if you are thinking about forming a special needs plan, there is no time like the present. Contact The Special Needs Planners of the Karp Law Firm for assistance.

Parents and Grandparents: Planning for Your Disabled Child

Parents and grandparents naturally worry about planning for their disabled child or grandchild. And that adds up to a lot of worried minds: According to the 2000 US Census, between 13% - 16% of families are raising a child with special needs. The figures for autism are particularly worrisome; in 2009, 1 of every 110 children was diagnosed with some form of autism. For boys, that figure is 1 in 70.

Today's medical advances mean more and more special needs children are outliving their parents. That makes planning for their lifetime care and support absolutely essential. But beware: Leaving an inheritance outright to your special needs child or grandchild could be disastrous for them, depriving them of essential SSI, Medicaid or other means-tested government benefits.

Instead, a Special Needs Trust - also known as a Supplemental Needs Trust - should be the cornerstone of planning for your disabled child. A Special Needs Trust is a trust you establish with your child or granchild as beneficiary. Funds in the trust may be used to provide items and services government benefits will not pay for - special therapies, specialized wheelchairs, transportation to visit family members, etc. Financial planning also comes into the picture. Often, insurance on the parents' or grandparents' lives provides the necessary trust funds.For a calculator from MetLife to help you determine what your child or grandchild's lifetime expenses will be, click here.

Selecting a trustee for your child's Special Needs Trust also must be done with the greatest of care. Administering this type of trust has special requirements. The trustee will need to work with an attorney who understands the rules of trust administration and what the trust can and cannot pay for, so that your child's government benefits are not jeopardized.

As you can see, the Special Needs Trust is a highly complex instrument. The guidance of an attorney with expertise in Special Needs Planning is essential.

Eighteen is not the magic number: Why you need to establish a Special Needs Trust Now

It's an alarming statistic: According to a recent study by Hartford Insurance, three out of five parents with special needs children have no plan to protect their child after the parents pass away.

True, parents of special needs children often face crushing time and financial pressures. Those pressures can push legal planning to the back burner. Many parents also believe they can wait to establish a Special Needs Trust until their child turns 18, when Medicaid and SSI kick in.

But waiting is a mistake. If you are a parent of a child with special needs, there are compelling reasons for you to establish a Special Needs Trust right now.

Among the reasons you shouldn't wait:

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  An estate plan will provide stability for your child if you die. And you have the peace of mind that comes from knowing that your child will be cared for, with the Special Needs Trust providing maximum flexibility and protection for the child.
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  A Special Needs Trust provides a safe haven for gifts and inheritances your child receives from relatives. It ensures those monies will be properly managed. It also ensures that those monies are not in the child's name when he turns 18, which could jeopardize his eligibility for vital government benefits.
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  If you have a life insurance policy intended to care for your child after you're gone, the policy can be put into a Special Needs Trust. Monies that flow into it will be managed by the trustee(s) for the child's benefit.
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  The trust can also serve as legal owner of a home, reducing the risks of placing property into the hands of someone who may not be able to properly maintain it.
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  The special needs trust can provide care management as well as a structure for family involvement in the daily activities of a person with special needs. In addition, experienced special needs trustees can be a great resource for you if you need additional care options for your child.