Planning For Your Special Needs Loved Ones

This year has flown by! We are in the month of October, which happens to be Special Needs Law Month,  and National Disability Employment Awareness Month. Throughout the month, our goal is to share tips and tools that will be beneficial to those with special needs, their loved ones, and also those who are disabled workers. This week, we want to share two tools you and/or your loved one with special needs can use to proactively plan for current and/or future needs. There are a number of federal and state program available to individuals with special needs, but they typically require that the potentially eligible individual have little to no income and resources. Unfortunately, we do not live in a country where healthcare and long-term care are inexpensive, so even those who do not depend on public benefits programs for food clothing and shelter, need access to these benefits to offset their health and long-term care costs.

A Special Needs Trust

A Special Needs Trust (SNT) is a trust that is established for an individual with special needs who is or may become dependent on public benefits.  The trust is specifically designed to meet certain supplemental needs and to improve the quality of life for the beneficiary, the special needs person.  Most importantly, the SNT is created so as to not affect the beneficiary’s potential eligibility to public benefits.  The trust would be available for the benefit of the beneficiary, and to provide him or her with resources that public benefits do not provide.

For the purpose of proactive planning, there are two types of SNTs you should be aware of:  A third-party SNT and a first-party or self-settled SNT.  A third-party SNT is created using the assets of a loved one, typically a parent or grandparent, for the benefit of the individual with special needs.  Whereas, a first party or self-settled SNT is created using the assets of the individual with special needs.

A properly crafted SNT may supplement/provide for needs such as medical and dental expenses, annual independent check-ups, necessary or desirable equipment (for example, a specially equipped van), training and education, insurance, transportation and essential dietary needs. However, the rules often change on the types of expenses that can be paid for by a special needs trust. Because this is an ever-changing area of the law, you should contact an Elder Law or other qualified attorney licensed in your state, if you are considering a special needs trust as part of your estate plan.

ABLE Act/ABLE Accounts

ABLE Accounts are tax-advantaged savings accounts for individuals with special needs and their families. These accounts are similar to the educational 529 savings accounts in terms of tax implications. So long as an individual is deemed disabled before the age of 26, that person may become the owner and designated beneficiary of an ABLE account.  Any person (the account beneficiary, family and friends) can contribute an amount less than or equal to the annual gift tax exclusion amount (currently $15,000) each year, without causing the individual with special needs to be disqualified for SSI or Medicaid benefits. Special needs persons who are employed may be eligible to deposit an additional $12,140 of their wages into their account each year. Similar to a Special Needs Trust, The ABLE Act allows distributions from these accounts to be made tax free so long as they are used on a “qualified disability expense.” A “qualified disability expense” means any expense related to the designated beneficiary as a result of living a life with disabilities. Such expenses include, but are not limited to, expenses for education, housing, transportation, employment training and support, assistive technology and personal support services.

Planning for a special needs loved one can be scary, confusing, and complicated. You’re not alone. We got you covered! Stay tuned for our next blog, or follow us on social media for more tips and tools.

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