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Estate Planning - Tips, Tricks, and Trends

ABLE Act accounts - an alternative to special needs, supplemental and pooled trusts.

Posted by Malissa Church | Aug 30, 2017 | 0 Comments

If you are looking for a way to set aside funds for a disabled person while also protecting their Supplemental Security Income (SSI) and Medicaid eligibility consider opening an ABLE Act (Achieving a Better Life Experience) account. Other options include special needs trusts and pooled trusts. However, special needs trusts are only available if the disabled person is age 52 or younger.

Internal Revenue Code was amended in 2015 to create Section 529A which allows for these accounts to be created click here for the IRS Bulletin. Various states subsequently enacted their own versions of Act with South Carolina's version passing in 2016. South Carolina is still in the process of implementing their ABLE program per the state Treasurer's office , but South Carolinians may set up accounts in nationally approved institutions and they will be honored by the South Carolina program when it is up and running. 

Here are eight key points to know about ABLE Act Accounts. If you would like more information or would like to discuss other ways to provide for a disabled person while also maintaining their eligibility for benefits please give me a call!

  1. You can set aside up to $14,000 per year for the benefit of an adult or child with disabilities to use for disabilities-related expenses.
  2. Funds can be used for "qualified disability expenses" which are broadly defined as expenses related to the disability to provide something assisting in increasing or maintaining health, quality of life, and independence for the beneficiary.
  3. ABLE Act accounts can grow tax-free but there is a 10% additional tax on non-qualified distribution earnings.
  4. ABLE Act contributions are tax-deductible if the funds are used to pay for qualified disability expenses. They are also deductible from South Carolina income tax.
  5. To be eligible, a beneficiary must be considered disabled by Social Security Administration standards and diagnosed with the disability by age 26.
  6. The maximum permitted total account balance is $100,000 for a beneficiary to remain eligible for SSI and Medicaid.
  7. When the account beneficiary dies, the state may file claims for funds in the account to reimburse for Medicaid expenses.
  8. South Carolina is developing its ABLE Act program but you can participate in an ABLE Act programs within other states. For a list and more information, access the ABLE National Resource Center.

About the Author

Malissa Church

Call me today to discuss affordable, comprehensive estate planning or issues you might face related to age-related dementia.

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