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

WILL AN INHERITANCE AFFECT SSI AND/OR MEDICAID?

This question arises frequently, and I often receive calls from parents of disabled children or professional Trustees as to the impact of an inheritance received from a grandparent or other relative, and whether or not that inheritance will affect “social security benefits.”

The short answer to this question is YES–if the disabled person is receiving either or both SSI and/or Medicaid.  Under both SSI and Medicaid rules, the disabled person cannot possess more than $2,000 in non-exempt resources.  (Exempt resources include things like clothing, household goods, personal effects, etc.) 

Thus, if a disabled individual inherited or received a gift of money or property that increased his/her bank account or list of assets/resources above $2,000 in value, the recipient would lose his/her SSI and Medicaid benefits unless the excess funds were immediately: (1) spent down below $2,000 for the benefit of the disabled person; (2) used to acquire exempt resources; (3) used to purchase a prepaid irrevocable burial contract up to $10,000; or (4) transferred into one form or another of a Medicaid pay-back trust [called a (d)(4)(A) trust, or a (d)(4)(C) trust, the later also known as “pooled” trust.]

If a disabled person is receiving SSDI (or “SSD”) which is an earned benefit program called “Social Security Disability Income,” an inheritance will not affect the continued receipt of that benefit.  SSDI is not a welfare program like SSI, and thus is not affected by receipt of an inheritance.  But if a person was receiving SSDI and Medicaid, he or she could still lose their Medicaid benefits unless one or more of the four strategies described above was implemented.

CONCLUSION:  A parent, guardian, or other caregiver should rarely discourage gifts be given to a disabled person from other family members, grandparents, etc., since there are ways to salvage these gifts via proper spend-down strategies or setting up a Medicaid payback trust, as described above. 

Curtis J. Shacklett, Esq.

Barber & Bartz

525 S. Main Street, Suite 800

Tulsa, Oklahoma  74103-4511

Telephone:  (918) 599-7755

Facsimile:   (918) 599-7756

E-mail:  cshacklett@barberbartz.com