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

ANOTHER TOOL IN THE TOOL BOX – The ABLE Act, an Overview

Recently Congress passed and the President has signed into a law a new form of investment account designed to provide a source for accumulation of funds to benefit a disabled person in a way similar to Section 529 accounts used for accumulating funds for qualified tuition programs. 

The “Achieving a Better Life Experience” Act (“ABLE” Act) is designed to benefit disabled persons specifically who are receiving Medicaid and/or SSI. 

The ABLE account is established as part of Section 529 of the Revenue Code and allows a disabled individual to maintain receipt of SSI benefits even though the SSI recipient has an ABLE account that contains assets up to but not exceeding $100,000.00.  If the account grows above that amount, the SSI benefits will be held in suspension until the account drops below $100,000.00, at which time the SSI payments will resume.

Likewise, a Medicaid recipient will not lose eligibility based on assets held in an ABLE account even if the size of the account exceeds $100,000.00.  However, similarly to a (d)(4)(A) trust, the ABLE account is subject to a Medicaid payback provision upon the death of the Medicaid recipient. 

An individual who is receiving SSI or disability benefits under Title II of the Social Security Act is eligible to use an ABLE account for “qualified disability expenses” which include:

·         Education

·         Housing

·         Transportation

·         Employment Support

·         Health and Wellness

The State must create the means to establish the ABLE Account (similarly to 529 accounts) and, although lawmakers have introduced bills, Oklahoma has not yet had time to get that completed.

The ABLE Account provides another relatively simple way of accumulating funds in a significant amount for the benefit of a disabled person, and once it is implemented by the states, it is a potentially useful tool in planning for the long term assistance for a disabled person.  It will take months before the details become clearer on how an ABLE account will work, but it may well be another tool in the estate planning tool box in serving individuals with disabilities.

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