3 Financial Aid Facts for Families of People with Disabilities

Posted by Haddad Nadworny on Wed, Jun 12, 2019 @ 06:00 AM

The Special Needs Financial Planning Team John Nadworny, CFP, CTFA | Cynthia Haddad, CFP | Alexandria Nadworny, CFP,  CTFA

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Filing FAFSA, filling in a College Scholarship profile or just finding out all you can about student debt forgiveness programs? Here is some information specific to ABLE Accounts, Special Needs Trusts, Social Security Benefits and the student loan process. 

Before we get started, a special shout-out to Mary Rubenis of the Massachusetts Educational Financing Authority (MEFA), sponsors of the Attainable Savings PlanSM  for contributing her insight and key  information. 

A Little Background Info about the ABLE Account & Special Needs Trusts:

The ABLE (or 529A) account is a tax advantaged account for individuals with a disability to pay for qualified disability expenses.  Unlike a typical 529 plan which requires funds be spent on qualified higher education expenses, the funds in an ABLE account may be used to pay for qualified expenses related to living with a disability. Qualified disability expenses may include education, transportation, housing, employment training and support, personal support services, health, basic living and assisted technologies and related support.

As of 2018, it is allowable to rollover up to $15,000/year from a beneficiary’s 529 account into their own or their family member’s ABLE account without penalty.  To read about the basics of the ABLE account, as well as suggested strategies and case studies that use the ABLE, click here

 A Special Needs Trust (SNT), also called a supplemental needs trust, is a vehicle to provide monetary support for a beneficiary without effecting their eligibility for needs-based government benefits, e.g. Social Security Income and Medicaid.  The beneficiary will not have access or control over the money in a SNT.

3 Financial Aid Facts

1. Reporting requirements for Free Application for Federal Student Aid (FAFSA)

FAFSAGuidance from the Federal Student Aid Office states that ABLE accounts, along with interest income and distributions, should be excluded as assets on the beneficiary’s FAFSA. ABLE accounts were created to supplement, and not to replace, eligibility for federal means-tested benefit programs. ABLE accounts would also not be reported on a sibling’s FAFSA, as the assets are considered those of the beneficiary, not the parents.

SNTs are treated as any other trust fund for the purposes of FAFSA and need to be reported. Restrictions on distributions from a SNT are imposed by the grantor of the trust and unless specifically excluded, these funds may be dispensed by the trustee to pay for educational expenses for the beneficiary.  The assets in the SNT are not included on the beneficiary’s siblings’ FAFSA.

Social Security benefits that are not subject to taxation do not have to be included on FAFSA. SSI recipient’s income levels are generally below the taxable threshold, so SSI generally does not need to be reported. If you receive SSDI and have substantial income, your benefits may be taxed at the federal level. For example, if you are single and your income is more than $25,000 per year but less than $34,000, you would have to pay taxes on about half the value of your benefits. If you earn more than $34,000 (or married and earn more than $44,000), 85% of your benefits could be taxed.

2. Reporting Requirements for College Scholarship Service (CSS ) Profile

The Federal Student Aid Office has not yet provided guidance on reporting assets in a SNT or ABLE. Currently, the CSS/Financial Aid Profile does require reporting the assets of siblings and may require the disclosure of assets in a SNT and ABLE.  In these circumstances, families should give details of how these funds are used in the special circumstances section of the application and ask each college for a professional judgment review.  While some financial aid departments will ignore the assets in the trust, most will not.  They may however, consider the high costs of dependent care when making their grant determinations.

3. Student Loan Repayment

student-loan-debt-1160848_960_720If their student loan covers a time period during which the individual had an ABLE account open, repayment may be considered a Qualified Disability Expense and be paid from the ABLE.

If you become totally and permanently disabled (TPD), you may qualify for a TPD discharge of your federal student loans.  Refer to DisabilityDischarge.com for more information. 

Also, If you are employed by a government or not-for-profit organization, you may be able to receive loan forgiveness under the Public Service Loan Forgiveness Program. Refer to StudentAid.ed.gov for more information.

Sources:

MEFA, Massachusetts Educational Financing Authority

Fidelity Investments, Attainable Savings Account

Evisors.com

Ableforalll.com

Nolo.com

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. 

Prior to investing in an ABLE or 529 account investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s ABLE program.  Withdrawals used for qualified disability expenses are federally tax free.  Tax treatment at the state level may vary.

Investing involves risk, including loss of principal.

 

 

Tags: transition planning, Special Needs Trusts, planning for college, ABLE Account, FAFSA, Planning for college with disabilities

5 Little Known Facts: The ABLE Account and Social Security

Posted by Haddad Nadworny on Wed, Jun 05, 2019 @ 06:00 AM

The Special Needs Financial Planning Team John Nadworny, CFP, CTFA | Cynthia Haddad, CFP | Alexandria Nadworny, CFP,  CTFA

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  1. May Social Security benefits be deposited into an ABLE account? 

    • adult-blazer-cellphone-2_1081230Social Security Income (SSI) is a means-tested program. SSI is intended to pay for living expenses for individuals with disabilities who would otherwise have a difficult time paying for food & shelter. It makes sense to segregate the SSI in an account used to pay for living expenses and not deposit into the ABLE account. One exception might be If the recipient is getting close to having $2000 in resources, they may choose to deposit some funds into their ABLE account.
    • Social Security Disability Income (SSDI) is an entitlement (not means-tested) program based upon the beneficiary’s earnings record. You may deposit SSDI into an ABLE account.
       
  2. What happens when a child has a disability under age 18, receives SSI and opens an ABLE account, and then becomes gainfully employed after age 18?

  • The Supplemental Security Income (SSI) program pays benefits to disabled adults and children who have limited income and resources. The Social Security Administration has a two-part definition and you must meet both parts to get benefits.

    1. If a person of any age is able to earn Substantial Gainful Activity (SGA), which is currently $1,220 gross per month, they will not be eligible to receive benefits from Social Security.
    2. The person must have a physical or mental condition expected to last 12 months or result in death that prevents them from earning SGA.

  • While this person may lose their SSI benefit, they may continue to contribute to their ABLE account- in fact, the ABLE to Work Act allows them to potentially contribute more! They may contribute the $15,000 annual limit PLUS their adjusted gross income or $12,140- the current federal poverty level, whichever is less, meaning they may contribute up to $27,140 in 2019. There is one caveat:  they are not allowed to participate in ABLE to Work and also participate in a workplace retirement or 401K plan.

  1. What is the status of child support and the ABLE account?

    • Child support is considered unearned income. Unearned income including pension, 401K, worker’s compensation payments, unemployment compensation, veteran’s benefits, rental income and child support payments can be deposited into an ABLE account. These income sources also follow the usual income counting rules for the public benefits program and cannot qualify you for additional benefits.
  1. Can you use the ABLE account to pay for housing expenses and avoid in-kind supports?
    • You can draw money from an ABLE account for housing expenses without it being considered an illegal transfer of funds. This would allow a parent or other family member to deposit money into the ABLE account to help pay living expenses.  If the money is given to the account holder directly, it is considered an In-Kind Support and may impact SSI.

  2. What is the status of Medicaid payback in Massachusetts and other states?

  • The Medicaid payback provision varies from state to state.
  • In Massachusetts, the state “may or have the potential” to claw back a portion of the proceeds an individual received from Medicaid from their ABLE account if they have one(minus any premiums they paid). In terms of ABLE, this claw back exists only during the period the ABLE account was in existence before their death. If they received Medicaid prior to the ABLE account-that portion is not included in the claw back- only the time period during the ABLE account applies. Before the claw back takes place, when an ABLE account owner passes away, the money in the ABLE account goes to the person’s estate. Prior to the claw back, the estate can pay funeral/burial expenses and any outstanding disability related expenses with the ABLE account however.  A person who receives Medicaid over a lifetime is likely to receive hundreds of thousands of dollars- with a smaller claw back potential.  Any potential claw back can be weighed with the benefits of ABLE overall.
  • Medicaid payback may only be avoided with a third-party special needs trust. Upon the beneficiary’s death, the proceeds will go to the secondary beneficiaries.

Read ABLE Basics, Strategies & Case Studies

Sources:

MEFA, Massachusetts Educational Financing Authority, Attainable Account

Fidelity Investments, Attainable Account

Social Security Administration, https://www.ssa.gov/benefits/ssi/

U.S. Dept. of Health and Human Services, https://aspe.hhs.gov/2019-poverty-guidelines

 

 

 

 

 

 

Tags: disability supports, Government Benefits, ABLE Account, Social security income

Reassessing Your ABLE Account Investment Choices

Posted by Haddad Nadworny on Sat, Jan 19, 2019 @ 07:00 AM

The Special Needs Financial Planning Team John Nadworny, CFP, CTFA | Cynthia Haddad, CFP | Alexandria Nadworny, CFP,  CTFA

We are committed to presenting complimentary educational workshops to  organizations and parent groups. We are currently booking presentations for the Spring 2019 season. Please click here to email Alex Nadworny or call 781-756-1804 . 

 

Reassessing Your ABLE Account Investment Choices

ABLEBoth the stock and bond markets took a bit of a roller coaster ride in 2018.  In light of this volatility, ABLE account owners may be wise to test and perhaps reassess the investment choices they have made for the funds in their account. 

As part of an advisory group implementing the ABLE account in Massachusetts, we learned that many people opening ABLE accounts stopped the application process when they were asked to determine the investment choices for their contributions. This behavior raised a concern that individuals enrolling in the ABLE program might not have the prior experience or knowledge of financial matters to make the best selection for their situation.

If you began investing in 2015 when the ABLE was first being offered, unless you withdrew funds for expenses, you most probably never saw your account balances decline in 2016 and 2017. During this period, both the stock and the bond markets experienced positive returns. 

Last year offered a different picture; in 2018 volatility returned to both the stock and bond markets and the returns on your investment, depending on when you put funds in, may have taken a hit.  For investors with little experience, it may be a shock to observe 90 cents where they had invested a dollar a short time earlier.  Regardless of how much money is in the account, it is critical to invest the funds in the ABLE account to meet the goals of the account owner.

 In many respects this is an opportunity to learn about how financial markets work.  Now would be a good time to take a look at your account balances and gauge your reaction to the performance of your investment choices in 2018.

 Key Considerations for Your Investment Choices

  1. Your asset allocation, or balance between stocks, bonds and money markets, should be based upon your personal ability to withstand a decline in your balance and your tolerance of market volatility .
  2. Your asset allocation should align with the timing of your goals.

If a portion of the funds in the ABLE are being used for transactions, owners should consider investing these monies with very low risk assets. Depending on how the account is being used, the funds should be invested to provide a mix between funding for transactions and growth for the future. See our case study below about Paul's ABLE choices

The markets have come back since the recent low on 12/24/2018, making now an excellent time to reassess your tolerance for risk and make an adjustment to your ABLE account.  This should be a thoughtful and informed evaluation; federal law allows account owners to change investments in their ABLE account twice per year.  Be sure you are comfortable that the money is invested to meet both your short-term needs and your long-term goals. 

Paul_pexels-photo-212286 Read More  about the ABLE Account.

An example of ABLE Investing:

Paul's ABLE Choices

 

 

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.

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 that are only available for investments in such state's ABLE program. Withdrawals used for qualified disability expenses are federally tax free. Tax treatment at the state level may vary.

Investing involves risk including loss of principal.

No strategy, including a diversified strategy, assures success or protects against loss.

Asset allocation does not ensure a profit or protect against a loss.

 

 

 

 

Tags: ABLE Account

ABLE Account Contributions and Social Security Income (SSI)

Posted by Haddad Nadworny on Sat, Aug 18, 2018 @ 08:00 AM

The Special Needs Financial Planning Team  Cynthia Haddad, CFP | John  Nadworny, CFP | Alexandria Nadworny, CFP

We are committed to presenting complimentary educational workshops to  organizations and parent groups. We are currently booking presentations for Fall 2018/Spring 2019 season. Please click here to email Alex Nadworny or call 781-756-1804 . 

ABLEThe analysis and case study below are excerpted from a Case Summary series offered by the National Disability Institute's ABLE National Resource Center(ABLE NRC).  John Nadworny met Chris Rodriguez of the National Disability Institute at a meeting prior to the ABLE's passage and has worked with Chris and the ABLE NRC on a number of presentations and webinars educating the public about ABLE. We share below information from the case studies presented by ABLE NRC. The case serves to illustrate the impact of the ABLE Account on Social Security and Social Security Income (SSI) disability benefits. 

The ABLE Account offers an individual with a disability, which began before age 26, an opportunity to save funds in a dedicated account to meet " qualified disability expenses" that will allow them to improve health, independence and quality of life.  To view the benefits, limitations and rules related to the ABLE Account, see ABLE Accounts:10 Things You Need to Know

SSI is based on financial need and therefore impacted by any income received by the SSI beneficiary.  Note: SSDI is not a means-tested benefit and is not impacted by the ABLE account. In 2018, the maximum SSI federal benefit is $750/month with states supplementing this amount at their option. Unless income exclusions apply, any income received by the SSI recipient will effect the SSI monthly payment amount. The maximum countable resources a beneficiary is allowed is $2000. If resources go above $2000, the right to an SSI payment may be suspended.  If resources remain above $2000 for 12 months, the SSI is terminated.  

ABLE Account & SSI

A summary of SSI policies regarding ABLE: 

(Source: POMS SI 001130.740, https://secure.ssa.gov/apps10/poms.nsf/lnx/0501130740.  )

 Contributions of the designated beneficiary to the ABLE account, from his or her monthly income (i.e., income other than SSI), will still count as income for SSI (subject to any income exclusions) and may result in a reduction to the SSI payment. Contributions from all others are excluded and not counted as income of the beneficiary.

• Earnings from the ABLE account are excluded and not counted as income or against SSI resource limits.

• Up to $100,000 of the account balance is excluded by SSI and not counted toward the $2,000 SSI resource limit.

• When the value of an ABLE account exceeds $100,000 and the amount above $100,000, combined with other resources, results in countable resources above $2,000, SSI payments are indefinitely suspended.

 Unlike the general SSI rules related to excess resources, SSI eligibility is not terminated after 12 months of excess resources related to the ABLE account. SSI payments will be restored once the overall countable resources are reduced to $2,000 or less. Under SSI’s ABLE policy, two years or several years could elapse and the beneficiary can return to SSI payment status when countable resources are again below $2,000.

 • When the SSI payment is suspended due to excess ABLE account resources, Medicaid eligibility will continue.(Note of caution to readers that while the cited policy does allow Medicaid to continue despite an ABLE account balance of more than $100,000, since Medicaid eligibility will be tied to SSI status in 41 states, we believe countable resources (other than the ABLE account) must still be below the $2,000 SSI resource limit in those states. In the remaining nine section 209(b) states, that opted to determine Medicaid eligibility separately, the ABLE account should still be an exempt resource but the person will have to meet any state-specific resource test to keep Medicaid. POMS SI 01715.010.)

 A Case Study of SSI being Impacted by an ABLE account

Source: ABLE National Resource Center

ABLE-1

Mario has $101,500 in his ABLE account and $1,500 in his checking account. Since his countable resources are now $3,000 ($1,500 from ABLE account + $1,500 from checking account), his ABLE account has caused him to exceed the resource limit and his SSI payments are indefinitely suspended.

Mario continues putting money in his ABLE account for 24 more months and his indefinite suspension continues. Then, with the account balance standing at $107,000, he takes a $21,000 distribution to purchase a new car (a Qualified Disability Expense), dropping his account balance to $86,000 at a time when his checking account balance stands at $850. Since the ABLE account balance is below $100,000 it is once again exempt and his only countable resource is the $850 in his checking account. Mario’s SSI payments will be restored without the need for a new application. Mario had Medicaid eligibility continue when his SSI payments were suspended for 24 months based on excess resources caused by the ABLE account.

To read a more detailed case study and analysis, see ABLE National Resource Center. 

 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.

Prior to investing in an ABLE account investors should consider whether the investor's or designated beneficiary's home state offers amy state tax or other benefits that are only available for investments in such states's ABLE program.  Withdrawals used for qualified disability expenses are federally tax free.  Tax treatment at the state level may vary.  Please consult with your tax advisor before investing. 

 

Tags: disability supports, government supports, ABLE Account, Social security income

ABLE to Work and Key Changes to the ABLE Account

Posted by Haddad Nadworny on Sat, Aug 04, 2018 @ 08:30 AM

The Special Needs Financial Planning Team  Cynthia Haddad, CFP | John  Nadworny, CFP | Alexandria Nadworny, CFP

We are committed to presenting complimentary educational workshops to  organizations and parent groups. We are currently booking presentations for Fall 2018/Spring 2019 season. Please click here to email Alex Nadworny or call 781-756-1804 . 

 

Changes to the ABLE Account for 2018

ABLEThere are significant changes/enhancements to the ABLE account for 2018.  We have summarized the changes based upon information from the National Disability Institute's excellent  ABLE National Resource Center.  To learn the basics about ABLE, check out our ABLE Accounts: Ten Things You Need to Know , adopted from the The ABLE National Resource Center.

Major changes for 2018 are:

  1. Increased annual contribution limit- now $15,000.
  2. ABLE to Work- additional allowable contributions by the beneficiary as a result of employment.
  3. Ability to Rollover funds from a 529 College Savings account to an ABLE -529A-account.
  4. Savers Credit - Access to the Retirement Savings Contribution Credit.

 1. Increased Annual Contribution Limit - The annual contribution limit is periodically adjusted by Congress for inflation. 

  • For the 2018 tax year, the annual limit is $15,000. 
  • Since an ABLE account may have many individuals depositing money into the account, it is important for the account holder to be sure the total of all contributions from all sources does not exceed $15,000. in one year. 

 

2. ABLE to Work- The ABLE to Work provision was passed by Congress as part of the Tax Cuts and Jobs Act of 2017.  It is currently set to expire on January 1, 2026.

  • This provision allows an ABLE account beneficiary who works and earns income to contribute funds above the $15,000 annual limit.
  • The additional contribution may be up to the lesser of: the account beneficiary's earned income or the federal poverty line, which for 2018 is $12,060. This means it is possible to contribute up to $27,060 to an ABLE account in one year. 
  • Two additional elements of the law to be aware of when considering eligibility for the additional contribution:
    • (1) the ABLE beneficiary may not be a participant in their employer-based retirement fund, including if an employer makes contributions to the fund on their behalf.
    • (2) the Beneficiary's employment earnings deposited in an ABLE account are still counted in terms of Substantial Gainful Activity (SGA) or earned income, and will be taken into consideration when  determining eligibility for certain public benefits. 

Example: Sheila, an ABLE owner has a job and makes $13,000. She does not participate in her employer's retirement plan. Although her parents have put $15,000 into her ABLE account in 2018, Sheila can contribute an additional $12,060 of HER OWN MONEY into her ABLE account.


3. 529 Fund Rollovers-  This provision allows funds in a 529 College Savings account to be rolled over into a 529A(ABLE) account. It is currently set to expire on January 1, 2026. 

  • The ABLE account beneficiary to receive the rollover funds must be either:
    • the beneficiary of the 529 College Savings Account or
    • A "family member" of the beneficiary of the 529 College Savings account
  • The rollover funds are subject to the annual contribution limit of $15,000 for any given tax year, given that no other contributions have been made into the account that year.

Example:  Max, a teenage child just received a diagnosis of autism. When he was born his parents started a college savings fund (529) for him but now it is not known whether he will go to college or not.  An ABLE account may be opened for Max, assuming he meets the criteria, and his parents may now roll over the 529 to an ABLE account without any penalties or taxes due on earnings.


4.  Saver's Credit- also known as the Retirement Savings Contributions Credit, was designed to provide an incentive for low and middle income individuals to save. It is currently set to expire on January 1, 2026. 

An ABLE owner contributing to their own account, and meeting the following eligibility requirements, may claim this credit toward taxes owed with the maximum value reducing the taxes owed to zero. The ABLE owner must be:

  • Age 18 or older
  • Not a full time student
  • Not claimed as a dependent on another person's return

Details about the Saver's Credit:

  • Maximum credit is $2000 for an individual and $4000 for a couple
  • Percent of your contribution allowed to take is reduced as your AGI ( Adjusted Gross Income) increases

 

This chart outlines the credit for each category of tax filer:

Source: the ABLE National Resource Center

2018 Saver's Credit      
Credit rate

Married-

filing jointly

Head of 

Household

All Other

Filers*

50% of your

contribution

AGI less than 

$38,000

AGI less than

$28,500

AGI less than

$19,000

20% of your 

contribution

$38,001-

$41,000

$28,501 -

$30,750

$19,001-

$20,500

10% of your

contribution

$41,001-

$63,000

$30,751-

$47,250

$20,501-

$31,500

0% of your

contribution

More than

$63,000

More than

$47,250

More than

$31,500

 

Example: You are an ABLE owner working and making $20,000. You have put $2000 into your ABLE account this year.  You can take a credit of 50% of your contribution,  equal to $1000 in this case, to reduce your tax liability. If possible, you can use this $1000 to contribute further to your savings. 

For further information, please contact us or visit the ABLE National Resource Center

 

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. [ add line space ] 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 that are only available for investments in such state's ABLE program. Withdrawals used for qualified disability expenses are federally tax free. Tax treatment at the state level may vary. Investing involves risk including loss of principal. No strategy assures success or protects against loss.

 

Tags: ABLE Account

Grandparents Gifts to an ABLE Account

Posted by Haddad Nadworny on Sat, Jun 10, 2017 @ 08:04 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

Case Studies Using the ABLE Account:

I.    Protecting Social Security Eligibility

II.   Save and Have Control of Your Own Money

III.  Representative Payees Managing Income and Social Security Benefits 

IV.  Grandparents Gifting to an ABLE 

The ABLE account provides grandparents with the opportunity to gift to their grandchild with a disability in the same manner as they contribute to their typical grandchild's 529 account. Many grandparents want to treat all of their grandchildren equally and using an ABLE account as a savings vehicle for gifting may help. 

A Case Study

The Situation:

Our client has a strong belief in higher education and set the goal of establishing educational accounts for all of their grandchildren soon after they are born. They have just celebrated the arrival of their third grandchild. However, this beautiful baby boy was born prematurely and with significant health issues which will likely cause developmental delays.  It is already known that his hearing has meaningful, and perhaps total, impairment. 

Options to Consider:

While the ABLE account is an option for these generous grandparents to consider, they must be mindful of some of the limitations of the ABLE account that do not apply to 529 accounts. The limitations they should take into consideration might include:

  1. An individual can only own one ABLE account. In this case, if the grandparents opened an ABLE account for their grandson, the parents or the other grandparents would NOT be able to open a separate ABLE account for him. 
  2. They are allowed up to the $15,000 contribution limit (2018) to fund the ABLE account.
  3. If the balance in the ABLE account exceeds $100,000, the individual's Supplemental Security Income (SSI) eligibility is impacted. 

Another option is to gift the funds directly to the parents and have them specifically earmarked for the benefit of the child. Should the grandparents have financial wealth, they may want to explore the option of creating a Supplemental Needs Trust and purchasing life insurance on their lives to fund it upon their death(s).  These are only a few common strategies we discuss with families.  There are various strategies and considerations the grandparents can explore with their team of advisors to determine the most appropriate option to gift to their grandchild with special needs.

 

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 Account

Using the ABLE Account: Case Study - For Representative Payees Managing Income & Social Security Benefits

Posted by Haddad Nadworny on Sat, May 20, 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.

Workshops Calendar

Case Studies Using the ABLE Account:

I.   Protecting Social Security Eligibility

II.  Save and Have Control of Your Own Money

III. Representative Payees Managing Income and Social Security Benefits 

ABLE.pngThe ABLE is a great tool to help keep a balance below $2,000 in a Representative Payee (or an Individual's) checking account. A representative payee helps beneficiaries who need assistance in managing their social security benefits.

A representative payee’s responsibilities include:

  • Using benefits to pay for the current and foreseeable needs of the beneficiaries;
  • Appropriately saving any remaining benefits;
  • Keeping good records of how benefits are spent.*
*Source: Social Security Administration

 

Case Study

 The Situation:

Our client called and was very distressed that she had lost her son’s SSI income due to having more than $2,000 in his representative payee account.

The Options We Considered:

In the past, our first go-to would have been to think creatively about items or services their adult child could both benefit from and pay for.  This would allow the parents to save their resources for their family’s goals. If the account continued to increase we would then suggest a “spend down” of the account to maintain eligibility for social security benefits.

In this case, we asked if there was anything he needed that she could spend the extra money on? She had already purchased a new computer for him as well as some new winter clothes. He really did not need much of anything else. She could put the additional money into his already established and funded first party supplemental needs trust. However, this was money he had inherited from his grandparents and she considered the SSI benefits “his money”.

So another option to be considered would be the ABLE Account, which would allow for contributions of excess funds above the $2000 threshold in the representative savings account.

 The Benefits of Using an ABLE Account:

The new ABLE account savings option allows contributions up to $15,000/year into the account, to be used for the beneficiary's short term needs or invested for longer term needs. As long as the account, housed in Massachusetts, remains under $100,000 her son’s benefits will not be impacted. When reviewing the investment options, we reminded her to carefully read all the materials should she choose the ABLE Account, and to choose the best investment for the beneficiary of the account: her child.

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 Account

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