You are ABLE To Achieve Financial Security for Loved Ones with Disabilities

In 2012, the U.S. Census Bureau released a report that approximately 1 in every 5 Americans had a disability, which translated into almost 56.7 million people.  Most people who are disabled don’t know what to expect yet, the CalABLE Act is available to access financial security for those with a disability to better manage expectations.

The ABLE Act empowers individuals with disabilities toward financial independence by saving money without adversely impacting public benefits.  CalABLE Accounts provide beneficiaries with greater fiscal stability and peace of mind for their loved ones.  Funds placed in a designated account do not adversely affect public benefits.  Moreover, the beneficiary can use those funds for a wide range of qualified expenses, such as:

• Education
• Transportation
• Health
• Therapy
• Personal Support, including adaptive equipment
• Housing
• Legal and Financial Management Fees
• Employment-related expenses, such as entrepreneurship

What is an ABLE Account?

CalABLE Accounts (ABLE Accounts) allow family, friends and employers to contribute up to $15,000 annually without adversely affecting the recipient’s public disability benefits.  Additionally, employed beneficiaries may contribute even more to their accounts.  If a beneficiary receives SSI benefits, he or she can save as much as $100,000 in his or her account without affecting federal and California state benefits. 

California residents enjoy the additional benefit of protection from both creditors and repayment of medical assistance.  Moreover, Medi-Cal is barred from filing a claim once the beneficiary has passed allowing beneficiaries the choice to leave a legacy for their loved ones. In addition to other costs, which can be reviewed in the CalABLE Disclosure Statement, there is an annual fee of $37 deducted in monthly installments from the account balance.

Who is Eligible?

To be eligible to open a CalAble Account, an individual’s disability must have occurred prior to the age of 26.  Those who meet the age of onset requirement and receive benefits under SSI (Social Security Income) and/or SSDI (Social Security Disability Insurance) qualify. In California, any individual who has the onset of a disability before age 26 may qualify for an ABLE Account if that individual is either: (1) eligible to receive benefits based on disability, such as SSI or SSDI; or (2) has a disability certification, including a copy of the diagnosis signed by a physician.  In some cases, when a disabled individual does not presently receive disability-based public benefits, that disabled individual can “self-certify” that their disability meets the Social Security Administration’s standards, which would allow them to qualify for a CalABLE account.  An individual may only have one ABLE account. 

Special Needs Trust

While ABLE Accounts allow for up to $15,000 in annual contributions, many parents of children with special needs desire peace of mind through a more comprehensive plan for their child’s future.  A Supplemental or Special Needs Trust (SNT) is a trust used to pay for a beneficiary’s needs not covered by MediCAL, SSI or other needs-based public benefits programs.  Due to the fact the beneficiary does not own the assets in the trust, the assets are not counted as “available resources” of the beneficiary.  This preserves the beneficiary’s eligibility for the previously mentioned, needs-based government programs.  Among other provisions, the terms of the SNT provide the trustee may only supplement the beneficiary’s government benefits, not replace them.  Examples of supplemental needs include the following: educational expenses, psychological therapy, any dental or medical services not covered by MediCal, phone bills, and recreational and entertainment expenses, appliances, accounting and legal expenses, transportation, clothing, pets and pet supplies. 

Pros and Cons

While certain limits exist on ABLE Account contributions, there are no such restrictions for a SNT and no age onset requirement.  However, unlike the ABLE Account, the beneficiary cannot contribute their own resources to a SNT without adversely affecting their public benefits.  As such, individuals with disabilities and their families should consider using both an ABLE Account and a Supplemental Needs Trust to save and invest money for their support, obtain a measure of financial independence, and enhance their quality of life.

Parent and Employer Resources

Here are two great resources for more information on Eligibility and an Employer's Toolkit containing a variety of fact sheets.

Know the facts and call for a one hour consultation, contact Terri Hilliard, PC Special Needs, Elder Law and Estate Planning Attorney.  www.terrihilliard.com 805-201-2552.