Virginia was the first state to adopt into law the Achieving a Better Life Experience Act of 2014 (the “ABLE Act”) that provides a new avenue for parents in planning for their special needs child.
However, the ABLE Act has its benefits and its drawbacks as described below, and should be used as a supplement to a Third Party Special or Supplemental Needs Trust Plan, not a replacement for an estate trust plan. You will want to consult an attorney, like us, if you don’t have a Trust Plan in place.
For the Best Benefits, Use the ABLE Act in a Two-Step Process
1. Set up an ABLE Savings Trust Account for Disability Expenses
The ABLE Act allows Virginians to set up a special ABLE Savings Trust Account to save funds to pay for the disability-related expenses.
Who is eligible? Someone who became disabled before age 26 and either (1) receives Social Security Disability Insurance (SSDI) or SSI, or (2) files a disability certification under IRS rules.
Benefits: Under the Act, the disabled child and his or her family can save up to $99,999 without becoming ineligible for Social Security and other government programs such as Medicaid, and earnings or contributions placed in the ABLE Savings Trust Account are exempt from both Federal and Virginia State income taxes.
For a child on SSI, if the account reaches $100,000 or more, the SSI benefits will be placed on suspension until the account drops below $100,000, then they will immediately resume. No re-application for SSI benefits is required. For a child on Medicaid, there is no loss of Medicaid benefits, even when the account tops $100,000 or more. The Able Savings Trust Account is administered by the Virginia College Savings Plan.
Covered expenses for the benefit of a disabled individual include: education; employment training and support; housing; transportation; assistive technology and personal support services; financial management and administration services; legal fees; oversight and monitoring; health, prevention and wellness; funeral and burial; and any other expenses approved under regulations.
2. Set up a Trust to Protect your Funds from “Pay Back” Requirements
Drawback: Under the present law, the amounts contributed and earned in your account are all subject to a “pay back” requirement or lien with Medicaid. This means the State is permitted to recoup the value of services provided to the beneficiary prior to his or her death, leaving nothing to pass along to other family members like siblings, a surviving spouse or grandchildren, etc.
Therefore, you need an attorney to set up a Third Party Special or Supplemental Needs Trust.
A Third Party Special Needs Trust provides a means to support a disabled child over their lifetime without jeopardizing, if drafted properly, the child’s access to Federal benefits like SSI and Medicaid. It also leaves any contributions remaining upon the child’s death to other family members.
It Pays to Plan for Now and the Future
If you have a special needs child, contact The Law Office of Patricia E. Tichenor, P.L.L.C. to set up a Special or Supplemental Needs Trust Estate Plan. It offers that extra layer of protection for your hard-earned assets and peace of mind.
Contact Your Attorney
At the Law Office of Patricia E. Tichenor, P.L.L.C., attorneys Patricia Tichenor and Camellia Safi specialize in family law and estate planning to assist people with family law issues. Call us today.