Patty Manko

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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

Managing Trust Assets:Balancing Fiduciary Responsibilities with Needs of Beneficiaries

Posted by Patty Manko on Sat, Mar 25, 2017 @ 08:00 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

accountant-accounting-adviser-advisor-159804.jpegManaging Trust Assets: An Investment Balancing Act

We help trustees meet their fiduciary responsibility by providing independent, objective advice in managing the assets to meet the needs of the beneficiary. According to the UPIA, the following considerations should be examined when building the appropriate investment portfolio: financial situation, current investment portfolio, need for income; tax status and tax bracket, investment objective and risk tolerance.

The investment manager should view the portfolio from a cash flow perspective; how much money may be taken out of an account while maintaining a high level of confidence that the money will last for a certain period of time. A distribution analysis, monitoring the rate at which money is being distributed from an account, should be performed at least on a quarterly basis.

Many special needs trusts have been established by parents for the benefit of their child with a disability (third party trusts). Other trusts may have been established by a parent, grandparent or court for an individual with special needs allowing them to protect their eligibility for certain government benefits (first party trusts). Regardless of how these trusts have been created, the guiding principles to follow in the investment management process is to create, monitor and change an investment portfolio to comply with the purposes, terms, distribution requirements and individual circumstances of each beneficiary. With an elder or disabled beneficiary, investment managers need to look beyond their model investment portfolios to the unique needs of the individual.

A good starting point in the process is to collect, analyze and review information or documents that pertain to the establishment and management of each trust account. The second step is to identify and establish the specific goals and objectives of each trust and the needs of the beneficiary. These goals and objectives should be determined by (but not limited to) the following factors:

  1. Income needs for short term, mid term and long term expenses
  2. Current and potential future assets to be added to the trust from future gifts, inheritances, settlements, etc.
  3. Income of beneficiary derived by all sources, including SSI, SSDI, Pensions, Child Support, etc.

  4. Government benefits currently being received by beneficiary such as Medicaid, Section 8, etc.

  5. Future potential government benefits, such as Medicare, etc.

To achieve these goals and objectives the portfolio must be invested across multiple investment classes. In addition, attention to fees and expense ratios of investments need to be considered and monitored. Overall, the account should be managed to pursue the needs of each specific beneficiary. One of the most important factors in determining the investment strategy of each account is the time horizon for the beneficiary. This is necessary to determine the most appropriate asset allocation including cash that must be available to help address the needs of each beneficiary. In situations where the trust assets are not adequate to provide for the lifetime needs of the beneficiary, a specific spend-down strategy should be followed. Since investing and planning is an art as well as a science, there are frequently various options and strategies to be considered. It is imperative to document the reason for each strategy and to identify the pros and cons of the various options.

Distributing Trust Assets: A Fiduciary Balancing Act

Paramount to the role of the investment manager and all of the strategies, suitability, and risk versus return analysis they are required to do is the role of the Trustee. The Trustee will dictate the specific distributions of the trust and needs of the beneficiary.

The Trustee looks at the portfolio from a fiduciary point of view, executing the provisions of the Trust document to meet the needs of the beneficiary and successors. It is their role to protect the integrity of the terms of the trust document.

 There are also times when a document is very flexible with distributions and other times that documents are very strict. In the end, the trustee must adhere to the legal requirements of the trust with the best interest of the beneficiary.

Another layer of complexity is added when the beneficiary is someone that has special needs and may not be able to communicate or understand their overall situation. Family members may or may not be involved in the life of the beneficiary. There may or may not be a written Letter of Intent to help the trustee get to know the beneficiary. The trustee is further challenged to maintain the values of the family and the spirit of the grantor when they may never have met the beneficiary prior to be appointed in the role of the trustee.

Balancing Together

A primary focus for meeting the needs of the beneficiary is a balance between the roles of the trustee and the investment manager. It is in working together that the strengths and viewpoints of each professional compliment one another. For example, the trust may indicate a certain percentage of interest and/or principal must be distributed. From an investment management perspective, this may be considered an excessive distribution rate that cannot be sustained. The Trustee will interpret the provisions within the trust. The role of the investment manager is to maintain a proper asset allocation and provide adequate cash required to meet the direction of the trustee.

 The key is in having effective communication between all parties working together as a team.

To learn more:

 How We Serve Trustees 

 Contact Us.

 

Tags: A Team to Carry On

2017 Resource Guide for Adults with Autism in Massachusetts

Posted by Patty Manko on Thu, Mar 09, 2017 @ 02:38 PM

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

 

MA DDS.png

The Massachusetts Department of Develpmental Services, Northeast Region, has put together a comprehensive guide for adults with autism.  Included are DDS Eligibility, Education, Employment, Housing Resources, Self-Advocacy… and much more!

Download the report here: DDS Northeast Region, Adult Autism Resource Guide, 2017 .

 

Tags: autism

Join us: Affordable Housing Options Beyond Section 8

Posted by Patty Manko on Sat, Feb 18, 2017 @ 08:00 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

We have a housing afforability problem in Massachusetts because we have a housing supply problem. Learn how to navigate and evaluate the options available for affordable housing: JOIN US for affordable housing research and tips from Eric Shupin, Director of Public Policy for the Citizens Housing and Planning Associaiton (CHAPA).

 RSVP : Alex.nadworny@shepherdfinancialpartners.com 

 

Housing Flyer.png

Tags: Housing

Tips for Talking about Money and Future Roles with Your Family

Posted by Patty Manko on Sat, Feb 04, 2017 @ 07:57 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

There are many ways to present your vision and discuss your finances around the future care of your family member with special needs. Opening the lines of communication with members of your Team to Carry On is key.
Begin with one on one, low-key conversations.
 It is often easiest and best to approach this process in a gradual manner and in an informal environment. Although it is important to have all family members in agreement, scheduling initial discussions in a formal meeting or large family setting is not always the best.

Gather information. We recommend speaking to one child at a time, to get their feelings about their willingness to help. This will give them the opportunity to share ideas with you rather than you telling them what you hope will happen. Remember, caring for a family member with disabilities is a lifetime commitment that you do not want to force on anyone, yet it is important for them to know your intentions.

hands-people-woman-meeting.jpgAfter everyone has had an opportunity to discuss their feelings and ideas in an informal way, you may wish to plan a discussion with everyone at once.  Since every family’s dynamics are unique, you will find the best way to communicate with your family.

Questions to ask and information to share.  The following steps should help to move the communication process along smoothly.

  • Share your vision
  • Talk about the amount of money you plan to have available to support your vision. You do not have to reveal all of your financial matters. You can choose to only mention the financial aspects that pertain to the needs of the family member with a disability.
  • Determine the best person to take on each role. For example, who is the best with finances? That person may be a good trustee or trust advisor of a Special Needs Trust. Who is most involved in the day to day life of the child? That person may be a good guardian.
  • Ask family members if they feel able to perform their roles independently. If not,design your plan to give them resources to work with. For example, let them know that they could hire an investment advisor to help with the trust management or a social worker to help oversee supports.

Family Parity . Sometimes parents feel that they must treat all of their children equally. They feel that their children expect it. However, in many cases children without disabilities are more than willing to forego any type of inheritance to guarantee security for their brother or sister with  a disability. They understand the financial realities and would rather make sure their brother or sister is taken care of and would not expect that everything is shared equally. Here's an example of a parent putting a plan in place for his son, Charles:

Although Charles is receiving all the benefits that he is eligible for and living independently, we feel that it is not enough for him to simply have what the government provides. We supplement his expenses by about $1,000 a month. This gives him the sense of self-worth and control to be able to do what he likes rather than do what someone else wants him to do. He has schizophrenia and his sense of self-worth is most important to his ability to function in life. In working with our financial planner and our attorney, we made arrangements for our other son to provide this supplement to support Charles’ needs without jeopardizing his government benefits when we are no longer able to. 

How much will it cost? So how do we determine how much money is needed? And how much is too much? Just as the educational needs of every child are unique, so are the long-term planning needs of every individual with special needs. Even two individuals with a similar medical and/or cognitive diagnosis, can have significantly different support requirements. With these varying requirements, costs will also vary. There is no clear answer; the best we can do is to maximize all resources and coordinate all of the Five Factors.

Beginning the conversation is huge. In our decades of planning, one of the biggest obstacles that we have encountered is that people do not feel comfortable talking about how much money they have. Even professionals in the field of providing services to families, including government agency employees that serve families, do not feel comfortable talking about money or the specific costs of providing services to individuals with disabilities. 

One of the first steps that is required for you to be able to achieve financial security for your child is to overcome the reluctance to discuss the issues of money. We all know it takes money to provide services, staff, housing expenses, employment supports, transportation, education, health care services and the like. We also know that the government does not have an endless supply of money to fund these services. That is why it is so important to have a comprehensive plan and to reevaluate it periodically.

Questions? Talk with us.

This information is not intended to be a substitute for individualized legal advice. Experience provided is for illustrative purposes only, and is not intended to provide specific advice or recommendations for any individual. Your situation and circumstances may be different. To determine which strategy may be appropriate for you, consult your financial, tax, or legal advisor prior to making a decision.

 

Tags: A Team to Carry On

January To- Do: Check Your Retirement Account Beneficiaries

Posted by Patty Manko on Sat, Jan 28, 2017 @ 08:00 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

box_with_check.pngRetirement accounts like 401(k)s and IRAs represent a large portion of most people's savings. While these plans encourage saving by offering significant tax rewards, it is important to know and understand the possible consequences when a beneficiary or contingent beneficiary is a person with special needs and plan accordingly.

Most retirement plans require some form of distribution from the account once an account owner dies. Upon the account owner's death, the proceeds are distributed according to the beneficiaries listed on each retirement account and not your estate plan. Generally speaking, if you are married, your spouse is usually listed as the primary beneficiary. At the owner's death, the spouse will be able to transfer the assets into a spousal IRA rollover. This will enable the spouse to defer the taxes until the funds are withdrawn from the account.

If you are not married and your intent is for an individual with a disability to receive any portion of the IRA, you should consider having those proceeds paid to a trust that has special needs provisions. Please note that the language in the special needs trust must accommodate retirement plan distributions properly.  It is critical to work with a disability law attorney who can make sure your documents are up to date and protect your child’s eligibility for government benefits.

Planning tip: 

If a special needs trust is used as the beneficiary of a retirement plan account, the income earned in the trust will be taxed to the trust, usually at a higher tax bracket than an individual tax bracket. The proceeds from a Roth IRA are distributed tax free upon death of the owner. If an owner has a Roth IRA in addition to other retirement accounts, it may be advantageous to have the special needs trust named as beneficiary of the Roth IRA and the other children named as beneficiaries of the other IRA and retirement plan assets.

It is not recommended to have an individual with disabilities named individually as the beneficiary of the traditional IRA or Roth IRA*, because an account balance greater than or equal to $2,000 will disqualify him or her for government benefits. Instead, if the owner wants the value of all or a portion of the IRA to be received by a person with disabilities, that person's special needs trust should be named as one of the beneficiaries.

 
Here's an Example:

If you have more than one child and you intend to split your retirement account between all the children, including your child with special needs, you should direct his or her share in the beneficiary designation to the special needs trust. An example would be to have Adam Miller name his wife, Justine, as his primary beneficiary. He would then name two of his children, Kyle and Alyssa, as contingent beneficiaries, each to receive 33% of the retirement account; and he would name the special needs trust created for his third child, Alexia, as a third contingent beneficiary to receive the remaining 34% of the retirement account. Adam would list the special needs trust for Alexia on his beneficiary designation form by including the proper registration, "The Alexia Miller Special Needs Trust Dated January 1, 2007."

Questions? Talk with us.

The opinions voiced in this material are for general information only and are 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. Tax laws and provisions are subject to change

* Roth RIA are distributed upon death of the owner tax free provided the account has been open for 5 years as of the date of death. Otherwise, taxes may apply to earnings distributed.

 

Tags: financial planning

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