How Does an ABLE Account Fit into Special Needs Planning?
For the parents or grandparents of a child with special needs, the importance of incorporating a special needs planning component into their comprehensive estate plan cannot be understated. While every special needs plan should be uniquely tailored to the needs of the client, a common component within these plans is an ABLE account. The Knoxville special needs planning attorneys at Stivers Law discuss how an ABLE account fits into special needs planning.
Why Is Special Needs Planning Necessary?
Parents have a legal, and moral, obligation to provide for a child’s care and maintenance until the child reaches the age of majority. Many parents continue to provide financial support to their children long after they become adults. If you are the parent of a child with special needs, providing that financial support is both more important and more complicated. Simply gifting funds or assets to your child, either while you are alive or upon your death, is not an option as it would be for a child without special needs. Your child will likely depend on the assistance provided by Medicaid, SSI, and other government programs for his/her entire life. Eligibility for those programs is determined, in part, by an applicant’s income and assets. Your direct gifts, therefore, could cause your child to lose his/her eligibility for assistance. Special needs planning uses estate planning tools and strategies to get around this obstacle and allow you to continue to provide for your child without jeopardizing his/her eligibility for assistance. One of the most used tools in a special needs plan is a special needs trust.
What Is an ABLE Account?
An ABLE Account is a tax-advantaged savings account for individuals with disabilities and their families. ABLE Accounts were made possible by the passage of the Stephen Beck Jr. Achieving a Better Life Experience Act, commonly known as the ABLE Act. The ABLE Act was intended to “secure funding for disability-related expenses on behalf of designated beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance, Medicaid, SSI, the beneficiary’s employment and other sources.”
The intended beneficiary is the owner of the account, but contributions can be made by anyone, including the beneficiary, family, friends, a Special Needs Trust or a Special Needs Pooled Trust.) All contributions, however, must be made using post-tax dollars and are not tax deductible for purposes of federal taxes. Some states, however, allow for state income tax deductions for contributions made to an ABLE account. A primary benefit of establishing an ABLE Account is that the income earned by an ABLE Account is not taxed.
Who Is Eligible for an ABLE Account?
To be eligible to open or own an ABLE account you must have a disability with an age of onset of disability before you turned 26 years of age. If you meet the age requirement and are also receiving benefits under SSI and/or SSDI, you are automatically eligible to establish an ABLE account. If you do not already receive SSI and/or SSDI but meet the age eligibility requirement, you may be eligible for an ABLE Account if you meet Social Security’s definition and criteria regarding functional limitations and receive a letter of disability certification from any of the following:
- A licensed physician
- A doctor of medicine or osteopathy
- A doctor of dental surgery or dental medicine
- A doctor of podiatric medicine
- A doctor of optometry
- A chiropractor.
Contact Knoxville Special Needs Planning Attorneys
For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about how an ABLE account fits into special needs planning, contact the experienced Knoxville special needs planning attorneys at Stivers Law by calling (305) 456-3255 to schedule an appointment.
Related posts:
Author Bio
Justin Stivers is the founder and managing attorney of Stivers Law, an estate planning firm specializing in wills, probate, trust administration, and financial risk management services. Justin’s approach goes beyond just creating legal documents. From aligning investments with estate plans to ensuring comprehensive insurance coverage, he safeguards a client’s legacy from unforeseen circumstances. His commitment extends beyond individual transactions, fostering lifelong partnerships to provide ongoing support and guidance.
With an impressive track record, Justin is licensed by the Florida and the Tennessee State Bars. His professional portfolio boasts Series 65 registration as a Registered Investment Advisor, the Wealth Management Specialist™ designation, and a 2-15 License for Health, Life, and Annuities. His dedication to excellence has earned him positions like Board Member of the Estate Planning Council of Greater Miami, Business Eagle Member of the Florida Justice Association, and active membership in esteemed organizations like the American Academy of Estate Planning Attorneys.
LinkedIn | State Bar Association | Avvo | Google