Using the ABLE Account: A Case Study - Save and Have Control of Your Own Money

Posted by Patty Manko on Sat, May 13, 2017 @ 08:02 AM

The Special Needs Financial Planning Team  Cynthia Haddad, CFP | John  Nadworny, CFP | Alexandria Nadworny, CFP  We are committed to offering educational workshops to organizations and parent  groups.  Please call Alex or click here to attend a workshop or discuss a presentation  to your group.

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ABLE.pngFinally, ABLE to Save and Have Control of Your Own Money

Important note: Individuals earning their own money may be able to contribute their earnings, within limits, above the $15,000 limit. Please see ABLE to Work Blog published August 2018. 

One benefit of The ABLE Account is that it provides the opportunity for gainfully employed people with disabilities, who meet the qualifying requirements, to save and control their own money without fear of jeopardizing benefits. 
 
Case Study:
 
The Situation:
"Sean" was diagnosed with bi-polar disorder and other concerns in his late teens and has struggled with many issues over the years.  One critical issue for him has been, and continues to be, money. He is able to work on a part-time basis, but usually does not work for an extended period of time. Working gives him a sense of purpose, but the fear of exceeding the $2,000 limit and losing his government benefits causes a great deal of anxiety. To maintain eligibility for monthly Supplemental Security Income (SSI), an individual cannot have more than $2000 of resources in his name. When he has had income, he often saved that money but if the balance crept up to the $2,000 limit, he would become very anxious and quit his job.  His therapist wants to be sure that he continues to work and does not depend solely on government benefits since then he becomes hyper-focused on not earning any money.  
 
The Options we Considered:
One option for Sean could be to fund a 1st party supplemental needs trust (SNT) and put his money in this account. But the expense involved in creating, managing and reporting for this trust account is substantial when compared to amount of money that will be in the account.  In addition, money in the trust could not be used to pay for rent or utilities. 
Another option would be to make sure that Sean spent his money each month to stay below the $2,000 limit. The concept of “forced spending” simply does not make any sense.  Spending money in order to reduce savings below the $2,000 limit is referred to as the “Spend Down Process”. 
Sean now has a thrid option: Since his diagnosis was made prior to age 26, he is eligible to open an ABLE account. He could then save his money in this account and use it as needed. 
Prior to the creation of the ABLE account, a Special Needs Trust and the “Spend Down” were the only options.
 
The Benefits of Using an ABLE Account:
Sean's earnings do not typically exceed $15,000(2018 limit); therefore technically he could save all of his earnings for future needs.  Practically he will not be able to do so, but he will be able to set aside money for future needs just like every other person! Having the ABLE account could grant Sean some sense of relief, as well as the independence associated with managing his own savings and spending.  The greatest benefit is that he may continue to work without fear of earning too much money. This is very important to his emotional well-being and self-worth.
 

Learn the Basics. The ABLE Account:  Ten Things to Know

 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual, nor intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. There is no assurance that the techniques and strategies discussed are suitable for all individuals or will yield positive outcomes.

The experiences described here may not be representative of any future experience of our clients, nor considered a recommendation of the advisor's services or abilities or indicate a favorable client experience. Individual results will vary.

Investing involves risk including loss of principal. Prior to investing in an ABLE account, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits available for investments in such state’s ABLE program.

Tags: ABLE Accoount

Using the ABLE Account: Case Study - Protecting Social Security Eligibility

Posted by Patty Manko on Sat, May 06, 2017 @ 08:35 AM

The Special Needs Financial Planning Team  Cynthia Haddad, CFP | John  Nadworny, CFP | Alexandria Nadworny, CFP  We are committed to offering educational workshops to organizations and parent  groups.  Please call Alex or click here to attend a workshop or discuss a presentation  to your group.Workshops Calendar

 

Protecting Social Security Eligibility

ABLE.pngAdults with disabilities become eligible for social security at age 18. Social Security (SSI) provides adults with disabilities a monthly benefit payment and health insurance if they meet a low income and asset threshold. To maintain eligibility for SSI benefits, an individual cannot have more than $2000 of resources in his or her name.  This includes cash, bank accounts, stocks, and U.S. Savings bonds.  Prior to the child's turning age 18, and before applying for SSI, make certain that the child meets this requirement. One strategy could involve transferring money to an ABLE account as this can help reduce savings beneath the $2,000 threshold and avoid the spend-down process.

Learn the Basics. The ABLE Account:  Ten Things to Know

 

Case Study:

The Situation:

During the settlement of an estate, the personal representative (PR) (may also be known as the executor) of the estate discovered one of the beneficiaries was receiving government benefits. While this person could definitely use the funds to pay for furnishings in her home and some much needed dental work, if she received the inheritance directly, it would disqualify her from the important benefits she was receiving, as it would bring her above the $2,000 asset limit she is allowed. The personal representative was required to distribute $33,000 to this beneficiary prior to the projected closing of the estate in February of the following year.

The Options we considered:

In discussing the current situation with the beneficiary and the PR, we discussed options for the purpose of educating the parties involved of establishing a 1st party supplemental needs trust (also known as a d4A or Payback trust) where the beneficiary could transfer the entire inheritance to the trust and continue to receive her benefits. 

We also discussed the option of distributing a portion of the inheritance this year and then again next year using an ABLE account. If the PR distributed $18,000 this year, the beneficiary would be able to buy new furnishings that she needed with about $2,000, get the needed dental work for another $2,000, and deposit $15,000 (2018 limit) into an ABLE account, assuming she had made no prior deposits into the ABLE in this year. The PR would then need to make the final distribution of about $15,000 to the beneficiary by the February of the following year. If the PR does this, the beneficiary could then keep $1,000 in her savings account (still under the $2,000 limit) and add an additional $15,000 to her ABLE account. The beneficiary would then able to use these funds for qualified disability expenses as needed without losing her SSI income and other benefits.

The Benefits of Using an ABLE Account:

Because of the amount of the inheritance, she did not need to go through the expense of hiring an attorney to establish a 1st party supplemental needs trust, find a trustee, file taxes, and then have to ask someone for money when she needed it.  She was already living independently and managing her own expenses fairly efficiently.  The ABLE account allowed her to continue to receive her benefits and use the funds in the account as she needed them.

Questions? Talk with us.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual, nor intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. There is no assurance that the techniques and strategies discussed are suitable for all individuals or will yield positive outcomes.

The experiences described here may not be representative of any future experience of our clients, nor considered a recommendation of the advisor's services or abilities or indicate a favorable client experience. Individual results will vary.

Investing involves risk including loss of principal. Prior to investing in an ABLE account, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits available for investments in such state’s ABLE program.

 

Tags: ABLE Accoount

ABLE Account News:  SHARE in Ohio & Update on Massachusetts

Posted by Patty Manko on Fri, Jun 17, 2016 @ 12:00 PM

 

The Special Needs Financial Planning Team at Shepherd Financial Partners
Cynthia Haddad, CFP® | John Nadworny, CFP® | Alex Nadworny, CFP® 

ABLE Account News:  SHARE in Ohio & Update on Massachusetts

John_ABLE.pngThis month, Ohio became the first state to offer accounts made possible through the Achieving a Better Life Experience, or ABLE, Act with the launch of its program. ABLE accounts are available to individuals with disabilities nationwide through the state’s offering known as STABLE.

With ABLE accounts, people with disabilities can save up to $100,000 without negative implications on their Social Security Income benefit.  To find out more about the STABLE account visit: http://www.stableaccount.com/

Update on ABLE in Massachusetts:

Last week, John Nadworny, representing the Massachusetts Down Syndrome Congress, attended a meeting of State Treasurers and representatives from the 6 New England states (MA, ME, VT, CN, RI, NH) to discuss the possibility of forming a consortium to offer the ABLE account to their constituents. This meeting was a first step toward crafting a platform for regional collaboration, as the New England states with smaller populations are concerned with achieving the critical mass necessary to effectively administer a program on their own. The consortium approach involves one state taking the lead and working together with the other states to develop a program that would provide meaningful benefits to the families in their state. At this point everything is still on the table; there may be a group of New England states joining together or some of the states may decide to partner with another program.  However, one takeaway is that all of the parties involved are carefully analyzing options and being diligent in making sure that their constituents are being well served.   

One topic under discussion involves the ABLE or 529A accounts potentially being more transaction based, with account holders making deposits and withdrawals on a regular basis than traditional 529 plans, in which account holders save for a long term goal of a college education. This contrast in objectives may mean the ABLE account will be significantly more costly to administer than the 529 accounts.

In attendance at the meeting was Christopher Rodriguez of the National Disability Institute (NDI), a non-profit organization dedicated to building a better economic future for individuals with disabilities and their families. He introduced the group to  the ABLE National Resource Center, http://ablenrc.org/, an excellent educational resource for families about the ABLE account.  

Currently negotiations are in process with financial institutions to implement a plan in Massachusetts. Stay tuned for future updates.

 

 

Tags: ABLE Accoount

Answers to FAQs: How to Use the ABLE Account

Posted by Patty Manko on Sat, Jun 20, 2015 @ 06:00 AM

faq

 

We have received many questions, from both families and professionals, about how to incorporate the ABLE account into their planning. We sat down with John Nadworny to ask him these questions and share with you the answers. 

Here is the first in a series of blogs featuring answers from John to questions about how to use the ABLE Account.  We will continue to publish information about the ABLE Account as it becomes available. 

Q: When will the ABLE account be available and how do I set it up?

John:  The US Treasury made a commitment to issue final regulations by June 30, 2015. At this time, it is uncertain as to whether that deadline will be met.  Although some states have initiated offering the ABLE account, there may be future issues depending upon Federal regulations. 

Massachusetts has formed a task force (of which John is a member), to craft implementation of the ABLE Account. Although it is difficult to give an exact date at this time, the task force estimates ABLE accounts to be available in early 2016.

Q: The ABLE account sounds great but will using it effect my eligibility for government benefits?

John One of the main purposes of the ABLE account is to allow individuals with disabilities to save without jeopardizing their eligibility for government benefits. It is important to be aware that SSI eligibility is suspended if account exceeds $100,000. Although, Medicaid eligibility continues if account exceeds $100,000.

Q: My son is about to turn 18 and he has a UTMA account with a balance of about $12,000 from gifts and other sources.  Would an ABLE account work for him  ?

John: The ABLE Act allows the transfer from UTMA or UGMA accounts to an ABLE Account.  At this point there are no limits on how much can be transferred from one of the above accounts to an ABLE Account.  This is one of the most significant benefits of the plan.

However, there are considerations when making this transfer.

ABLE account contributions must be made in cash.  Both the personal and tax consequences of liquidating the UTMA account holdings need to be considered when making this transfer.  In this case, due to the relatively small amount, $12,000., the tax consequences will most probably not impact the ABLE being the right choice for these funds.

If there are significant assets involved, a trust should always be considered as an option.  The term significant is different for everyone, but a starting point may be $50,000 for many families.  Again, every situation is different; therefore you should speak to a planner who specializes in Special Needs Planning or a qualified estate planning attorney.

Q: I want to gift to all my grandchildren while I am alive. Can a grandparent give a gift to an ABLE account when gifting to grandchildren's 529 plan accounts?

John:  Like a 529 College Savings Plan, the annual limit that can be deposited into an ABLE Account will likely be $14,000 each year (based on 2015 limits). Although I have not seen this in the plan’s language, this amount will likely increase as it is tied to the amount that a person can annually gift for estate tax purposes. However, currently with a 529 College Savings Plan a person can deposit up to $70,000 in one year but not contribute any more over the next 5 years without filing a gift tax returns. This is a detail that will probably be worked into the plan as the US Treasury finalizes the regulations.

When account balances exceed $100,000 there will be an offset for an individual’s SSI check.  Also, although your grandchildren may have more than one 529 account, an individual may only have one ABLE account.

 

Click here to  Send us your questions  about the new ABLE accounts.

Journalists may contact John directly via or by telephone 781-756-1804.

The opinions voiced here are for general information only and not intended to provide specific advice or recommendations for any individual, nor intended as tax or legal advice.

There is no assurance that the techniques and strategies discussed are suitable for all individuals or will yield positive outcomes. Investing involves risk including loss of principal.

Prior to investing in an ABLE account, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits available for investments in such state’s ABLE program. Consult with your tax adviser before investing.

 

Tags: ABLE Accoount

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