Congress Provides Some Relief for Special Needs Beneficiaries

Congress Provides Some Relief for Special Needs Beneficiaries

By passing the ABLE (Achieving a Better Life Experience) Act last December, Congress has provided some financial relief for families with special needs children.  Children who suffer developmental disabilities often qualify for government benefits that provide financial assistance well into adulthood.  However, to qualify for these government benefits, a recipient usually must own less than $2,000 in assets.  Therefore, significant direct inheritances from parents or grandparents could jeopardize the government benefits a special needs child is otherwise entitled to receive.  Typically, the only was such a beneficiary could inherit any significant wealth was for their family to have a special trust established for the child, where that child is only a beneficiary of the assets (child has neither ownership nor management of such assets) and the assets are for that child’s supplemental needs beyond what’s provided by government benefits.

The ABLE Act, however, provides families with a bit more flexibility for special needs beneficiaries. Under the new law, a tax-favored savings account can be established for a disabled child or adult who became disabled before age twenty-six.  Up to $14,000 per year can be sheltered in this account and anyone can contribute to it.  Additionally, the first $100,000 in the account would not count as an asset of the beneficiary in considering eligibility with government programs such as SSI (Supplemental Security Income).

The money in the account is to be used for “disability-related expenses.”  But that term is broadly defined to include such expenses as education, housing, transportation, employment; healthcare, financial management and administrative services; legal fees and funeral and burial expenses.

It is anticipated that this account will be managed by the states in a manner similar to the 529 College Savings Plans and will be available to the public by 2016.

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