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Caring for someone with special needs can be taxing on an individual, especially when it comes to finances. There are programs out there to help alleviate some of the stress.
Consulting with professionals knowledgeable about special needs individual planning and appropriate funding is best done early in the planning process.
In July 2015 The Centers for Disease Control and Prevention reported, “Recent estimates in the United States show that about one in six, or about 15%, of children aged 3 through 17 years have a one or more developmental disabilities. Developmental disabilities are a group of conditions due to an impairment in physical, learning, language, or behavior areas. These conditions begin during the developmental period, may impact day-to-day functioning, and usually last throughout a person’s lifetime.”
Providing care and support for special needs individuals translates into a different type of planning over an extended period of time with available funding and personal care.
The challenges faced by caregivers and disabled individuals can be daunting. Fortunately, programs have been promulgated to help ease both the financial and emotional stresses than families and disabled individuals endure.
According to Money, “Every state has a federally funded Community Parent Resource Center to help special-needs parents obtain services, understand their rights, and connect with local resources. Visit Center for Parent Information and Resources find your local center."
Those individuals who qualify for state or federal benefits due to a disability must meet strict requirements in order to receive public income assistance including: healthcare, housing, food, etc. In order to further help those individuals who wish to participate in other available programs, the Stephen Beck, Jr. the Better Life Experience Act of 2014 (ABLE) was passed. The Act also created a new Internal Revenue Service (IRS) Section 529A tax favored qualified ABLE Plan.
Prior to ABLE being available, special needs individuals would possibly forego the availability of participating opportunities for fear of losing public disability benefits.
According to the ABLE National Resource Center, “Eligibility for these public benefits (SSI, SNAP, Medicaid) require meeting a means or resource test that limits eligibility to individuals to report more than $2000 in cash, savings, retirement funds and other items of significant value”. Despite receiving assistance for ones needs, there are expenses which continually present and must be paid. The conundrum is obtaining additional funds without breaching the limits of the means or resource test.
“The Achieving a Better Life Experience (ABLE) Act of 2014 permitted states to create tax-advantaged savings programs for eligible people with disabilities (designated beneficiaries). Funds from these 529A ABLE accounts can help designated beneficiaries pay for qualified disability expenses. Distributions are tax-free if used for qualified disability expenses”.
An ABLE account can only be opened for an eligible special needs individual. You must have a disability that began before the age of 26, but you can open an ABLE account at any age thereafter.
The ABLE National Resource Center reported these states currently offer ABLE Plans. Each state determines if only in-state residents may participate or allow access by out-of-state eligible individuals. The ABLE legislation allows for an exemption in a qualified account of up to $100,000 without adversely affecting the $2,000 SSI means test. Accumulated amounts greater than $100,000 will not jeopardize the recipient’s eligibility with Medicaid, but will suspend further SSI payments until falling under the $100,000 threshold.
Savings for College, LLC indicates, “529 ABLE accounts are savings accounts administered by the states. States provide families with multiple investment options to suit various savings goals and risk tolerance levels. Account owners will be able to make changes to their investments two times per year”.
The concern for special needs individuals and families is losing available benefits. Unexpected expenses may include additional costs in caring for a disabled person such as a child or adult, having access to appropriate housing, technology and transportation needs, non-covered medical expenses or additional personal assistant help and more.
Accessing additional monetary sources that can supplant vs supplement benefits received may help avoid any potential administrative conflict.
If accumulated assets in an ABLE account are spent on one of the following qualified disability expenses, as defined by federal law, it can earn and be withdrawn tax-free. Qualified expenses according to the IRS, “Can include housing, education, transportation, health, prevention and wellness, employment training and support, assistive technology and personal support services and other disability-related expenses”.
According to IR-2018-139, June 15, 2018, “The new law also enables eligible individuals with disabilities to put more money into their ABLE accounts, qualify for the Saver's Credit in many cases and roll money from their 529 plans -- also known as qualified tuition programs -- into their ABLE accounts ... if the beneficiary works, the beneficiary can also contribute part or all of what they make to their ABLE account.”
The IRS also reported rollovers from 529 plans, in addition to any contributions made to the designated beneficiary's ABLE account (other than certain permitted contributions of the designated beneficiary's compensation) cannot exceed the 2018 annual ABLE contribution limit of $15,000.
Having a plan is a constant work in progress. There are no guaranteed constants and life’s paths are often filled with ups and downs which require course adjusting to remain on a clear route.
Consulting with professionals knowledgeable about special needs individual planning and appropriate funding is best done early in the planning process. Having a financial plan in place will help keep you on track should the unexpected arise.
Realistically, special needs individuals may well out-live caregivers. Clear instructions, necessary legal and financial documents, selection of trusted family or friends to act as appropriate legal guardians, custodians and trustees are important steps in caring for special needs recipients. As important, safeguard supplementing future recipient’s needs and not inadvertently supplanting any available public disability benefits.
Dr. Wolfson is a financial consultant and advisor. He retired after 27 years of active chiropractic practice. Dr. Wolfson can be reached at (631) 486-2792 or firstname.lastname@example.org. View more published articles here.