In Special Needs Planning

Special Needs Legislative Update

Brothers-1633653A new year is an excellent time to take stock and take care of planning. In recent years, some changes have been made in the law that may help those looking to plan for special needs. These changes may make it easier for people to keep funds on hand for the benefit of an individual with disabilities without running afoul of rules that require assets to be below a specified level to qualify for benefits.

Achieving a Better Life Experience Act of 2014

One law that may have a significant impact on individuals and families dealing with disabilities is the ABLE Act. Signed into federal law in 2014, the Achieving a Better Life Experience Act of 2014 (ABLE Act) allows for the creation of tax-deferred savings accounts for disability-related expenses. An individual who developed significant disabilities before age 26 and who receives SSDI or SSI benefits can save up to $100,000 in an ABLE account, and generally, that account will not be counted for purposes of qualifying for federal means-tested benefits such as SSI or Medicaid. If the ABLE account balance exceeds $100,000, the beneficiary of the account will remain qualified to receive SSI benefits, but will not receive a payment until the account balance drops below $100,000.  Medicaid benefits will continue regardless of how much money is in the account.

The funds in an ABLE account can be used for expenses for the disabled person’s benefit, including education; housing; transportation; employment training and support; assistive technology and personal support services; health and wellness; financial management and administrative services; legal fees; expenses for oversight and monitoring; funeral and burial expenses; and any other expenses approved under regulations implemented by the Internal Revenue Service. Louisiana has passed its own version of the ABLE Act; however, the program to oversee and administer ABLE accounts in the state is still being developed.

Special Needs Trust Fairness Act

Wheelchair-1595794A second law of importance is the Special Needs Trust Fairness Act. For a number of years, a self-settled special needs trust (SNT) has been a valuable planning tool for those considering long-term care planning for special needs. In 1993, a revamp of Medicaid included the Omnibus Budget Reconciliation Act of 1993, or OBRA-1993, which provided for the creation of a self-settled SNT, using the funds of a disabled individual under age 65, by a parent, grandparent, guardian, or court. The funds in such a trust are not counted for purposes of qualifying for Medicaid or other means-tested benefits, but upon the termination of the trust, Medicaid must be repaid for the cost of care it provided.

The self-settled SNT has been a valuable planning tool in allowing those with disabilities to receive funds through an inheritance, legal settlement, or otherwise without those funds disqualifying them for vital governmental benefits. Wonderful for parents of special needs children, either minors or adults, but what about adult individuals with disabilities who were capable of handling their own affairs, who didn’t have living parents and didn’t need a guardian? Under the statute as passed in 1993, they did not have the ability to set up a self-settled SNT for themselves.

Enter the Special Needs Trust Fairness Act. Passed into federal law in December 2016, this law amended the existing statute to provide that a disabled individual who has mental capacity can now create and fund his or her own self-settled special needs trust. This change in the law allows capable individuals with disabilities to make their own decisions and not rely on others to act as their advocate.

Both of these laws will provide individuals with disabilities and their families the ability to have more assets on hand to meet the needs of the disabled person without the fear of losing valuable and necessary public benefits.

As with any other type of financial and legal planning, be sure to consult a qualified professional experienced in special needs planning if you are interested in an ABLE account or a special needs trust. A qualified professional can assist you in creating a plan tailored to your particular situation, and one that is in line with current law and regulations.

Linda-photo-largeThe information provided is not intended to be legal advice and does not constitute an attorney/client relationship. You should consult with an attorney for individual advice regarding your own situation. Ms. Melancon has engaged in the practice of law in Ascension Parish for the last eighteen years. The primary focus of her practice is estate planning, probate, special needs planning and elder law. For more information or to attend an upcoming estate planning seminar, call her office at (225) 744-0027.

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