USING AN ABLE ACCOUNT ALONG WITH A SPECIAL NEEDS TRUST – A HANDY DUO

Oklahoma implemented the ABLE Act (https://okstable.org/) in May, 2018 (see my blog post).  Because of the many positive benefits of an ABLE Account, establishing an ABLE Account by for the benefit of a person with disabilities is often a wise and practical solution to meeting some of the needs of a disabled person even if a Special Needs Trust (SNT) already exists for the same beneficiary.  The reasons for having both are often rather compelling:

If the disabled beneficiary has sufficient cognitive ability to self-advocate or manage a debit card, then funds can be distributed from the SNT to the ABLE Account.  Thereafter, qualifying distributions (“Qualified Disability Expenses” or QDEs) can be made from an ABLE Account to or for the use of the beneficiary, and such distributions are not treated as “income” to the beneficiary which, were they otherwise treated as income, may have reduced or caused a loss of SSI and/or Medicaid.

The list of permitted disbursements (i.e., that don’t count as income to the beneficiary) from an ABLE Account tends to be a longer and broader list than permitted distributions from an SNT.

     The time required of a professional trustee can be reduced if the trust that is professionally managed can make a disbursement to an ABLE Account established for the same beneficiary, particularly if the beneficiary can manage disbursements from the ABLE Account himself, or with some assistance from a family member or friend.  

However, due to the annual contribution limit for ABLE Accounts being equivalent to the annual gift tax exclusion under IRS Code Section 2503 of Title 26 (currently $15,000 per year), the disbursements from the SNT to the ABLE Account will not eliminate using the SNT for larger expenses of the disabled beneficiary.

Even a first party SNT is permitted to make distributions to an ABLE Account established for the same beneficiary as the SNT. 

An ABLE Account won’t always eliminate the need for an SNT, but it can sometimes serve a very useful role along with the SNT. 

Curtis J. Shacklett, Esq.

Barber & Bartz, P.C.

525 S. Main St., Ste. 800

Tulsa, OK 74103-4511

Telephone: (918) 599-7755

Facsimile: (918) 599-7756

Email: cshacklett@barberbartz.com

Website: www.barberbartz.com

OKLAHOMA ABLE ACT – We finally have our Act together!

As previously described in my blog post entitled Another Tool in the Tool Box – The ABLE Act, an Overview, Oklahoma has finally made operational our own ABLE program for Oklahoma residents.  Effective May 31, 2018, the Oklahoma State Treasurer’s Office will launch our own state’s version of the federal ABLE program.  It will be called the Oklahoma STABLE Program (STABLE = State Treasury ABLE Program).  Additional information on Oklahoma’s STABLE Program can be found here. 

Effective May 31^st, Oklahoma residents with a disability diagnosed before age 26 will have the opportunity to establish an ABLE Account to “store” excess funds in an account from which disbursements can be made for “qualified disability expenses.”  Funds held in the STABLE account will not be deemed an “available resource” for Medicaid and SSI programs.

Curtis J. Shacklett, Esq.

Barber & Bartz, P.C.

525 S. Main St., Ste. 800

Tulsa, OK 74103-4511

Telephone: (918) 599-7755

Facsimile: (918) 599-7756

Email: cshacklett@barberbartz.com

Website: www.barberbartz.com

Assets in 529 College Tuition Plan are Not Considered Available Resources of the Over Age 18 Beneficiary

A recent question has arisen regarding whether or not assets held in a 529 College Savings Plan (“Qualified Tuition Program”) for the benefit of a beneficiary who is disabled over eighteen years of age will be treated as a “resource” by either or both SSI (Supplemental Security Income) or Medicaid.

Some parents establish a 529 Plan for a young child in anticipation of saving for the child’s future (and the presumed need for) post-high school education expenses at a college or university.  Years later, due to illness, injury, developmental delays, or disabilities, it may become apparent to the parent that the child would not likely be able to attend college or university but instead does then, or shortly will, need to apply for and receive public benefits like SSI and/or Medicaid.  Will those funds held in a 529 Plan contributed by the parents (or others) now hinder, or even prevent, the beneficiary from being able to obtain SSI and Medicaid, if the beneficiary would otherwise qualify for those benefits??

Social Security has issued a POM which addresses how College Savings Plans are to be treated by the SSA.  The POM is found at SI 01140.150, entitled “Qualified Tuition Programs” (QTPs).  Included in the provisions of this POM is the specific finding that, since the 529 is deemed to be “owned” by the person establishing the account, it is therefore not owned by the beneficiary and, therefore, should not be deemed a resource of the disabled beneficiary.  This is great news for the beneficiary.  In fact, the parent (who is normally the custodian of the account) can use the funds to benefit the beneficiary in certain circumstances for educational needs without having the transfer the assets into an ABLE Account (see blog post), or into another alternative, such as a Medicaid Payback Trust [e.g., (d)(4)(A) or (d)(4)(C)].

In addition, the 529 Plan does not require any “Medicaid payback” to the state Medicaid program since the assets held in the 529 Plan are not deemed to be owned by and are not, therefore, “resources” of the beneficiary.

The recently passed “Tax Cuts and Jobs Act” expanded the use of 529 Plans for expenditures for K-12 tuition, thus making the assets available for educational purposes of a younger disabled person who may not qualify for college or university.  After completion of whatever educational needs the beneficiary has, the new tax act does allow 529 Plans to be rolled over into an ABLE account.

Using the funds in the 529 Plan to benefit the disabled beneficiary, without damaging the beneficiary’s public benefits and without incurring a Medicaid “payback” at the death of the beneficiary, is a two-fold benefit, a real “win/win.”
 

Curtis J. Shacklett, Esq.

Barber & Bartz, P.C.

525 S. Main St., Ste. 800

Tulsa, OK 74103-4511

Telephone: (918) 599-7755

Facsimile: (918) 599-7756

Email: cshacklett@barberbartz.com

Website: www.barberbartz.com