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ABLE Act to allow special needs individuals to save money without losing benefits

On behalf of Marco Chayet

A bipartisan federal law now allows certain eligible individuals the chance to save assets without losing benefits to Medicaid and SSI

Families who have a special needs member understand the difficulty of saving for expenses not covered under Medicaid. Medicaid severely restricts the income and assets a person can have in order to qualify. An easier way to save might soon be on the horizon, however, thanks to bipartisan legislation that passed late in 2014.

In December2014, President Obama passed into law the Achieving a Better Life Experience Act (ABLE). This law allows individuals diagnosed with a disability before age 26 to save for quality-of-life purchases without losing eligibility for Medicaid.

An ABLE account functions similarly to a 529 college savings plan (it is part of Section 529 of the Internal Revenue Code). It allows a special needs individual to accrue tax-free savings to pay for health expenses, education, housing, transportation, and numerous other quality-of-life purchases. It allows contributions of up to $14,000 per year and $100,000 total before Supplemental Security Income benefits are suspended.

Each state must create its own ABLE account. In Colorado, the state has yet to enact its own state-run plan. However, it is likely that many states, including Colorado, will set up plans in the near future. Under the federal law, states that do not set up their own ABLE accounts can piggyback on another state’s plan.

Estate and legal planning still necessary

The passage of the ABLE Act has been a cause for celebration among Colorado families since its passage. However, there are still numerous legal considerations for families and individuals dealing with a disability. For example, under the ABLE Act, individuals who save under a state-run savings plan must pay the remaining balance to the state upon death.

Traditional options like a special needs trust may still provide numerous benefits to a special needs individual while still allowing quality-of-life purchases. In addition, because ABLE accounts are capped, parents of special needs children must still create a comprehensive estate plan if they want to leave an inheritance to a child with special needs. Under Colorado state law, parents of children with special needs may lose a significant amount of money to the state or have their child lose public benefits without proper planning.

Whether an ABLE account is beneficial in addition to a special needs trust or as part of comprehensive special needs planning depends on individual circumstances. At Chayet & Danzo, LLC, our attorneys have years of experience creating comprehensive estate plans and special needs trusts for families looking to preserve eligibility for Medicaid and SSI while still retaining some of their own assets.

Colorado families looking to explore their legal and financial options should contact Chayet & Danzo, LLC for a free consultation.

Keywords: Special needs trust, ABLE act, special needs planning, Medicaid, Medicaid eligibility.