Any adult child with special needs who owns more than $2,000 in countable assets is generally ineligible for many public benefits programs, including Medicaid and Supplemental Security Income (SSI). But because an ABLE account with a balance below $100,000 is not counted as a resource for most public benefits programs, the account provides an opportunity for planning to ensure that the child does not become ineligible because of wages, gifts, or other sources of funds that may become available to her. Here are four practical uses for an ABLE account that could have a significant impact on a beneficiary’s quality of life:
An ABLE Account can protect UGMA/UTMA account funds:
Does your child have a savings account in his or her own name? Perhaps gifts from family over the years were deposited into the child’s account? Such an account is often known as an “UGMA (or UTMA) account,” named after the Uniform Gifts (or Transfers) to Minors Act, the law that governs bank accounts owned by minors.
When the child becomes an adult, that bank account will suddenly be counted as a resource for purposes of determining eligibility for many public benefits programs. One practical use of an ABLE account is as a repository for money from an UGMA/UTMA account of a child who is coming of age so that it will not be counted in determining her continued eligibility for public benefits.
An ABLE Account can shield income:
Another practical use for an ABLE account is as a receptacle for child support, alimony, or even earned wages. Using an ABLE account for sources of income such as these shields them from being counted as a resource of the child. If more than $2,000 is accumulated by the child over time in an ABLE account, the eligibility for government programs is protected. In addition, an ABLE account is flexible enough that payments deposited into an account can easily be used to pay for many of the expenses a child may have.
An ABLE Account can give the child financial control:
Perhaps the most important practical use of an ABLE account is that it can be managed and controlled by the child. If a special needs trust were used, a trustee would be required to approve each and every expenditure. Instead, an ABLE account gives the child access to money that she alone can decide how to spend, which, in turn, can provide a boost in self-esteem because the child is in a position to make these financial decisions herself. This autonomy also allows the child to make decisions on saving money. Through an ABLE account, the child can decide whether or not to save money for such things as a home, a car, or even a wedding.
An ABLE Account can pay household expenses:
Another beneficial use of an ABLE account is using it to pay for utilities and other housing expenses without triggering SSI’s “in-kind support and maintenance” (or ISM) penalty that would otherwise be incurred if a third party, including a special needs trust, made the same expenditure. When it comes to its ISM rules, the Social Security Administration views money in an ABLE account as if it were the SSI beneficiary’s money, so there is no penalty when the recipient of a government benefit uses her own funds from an ABLE account to pay for her own housing expenses.
When it comes to planning for your child’s needs, it is important not only to consider the advantages of an ABLE account standing alone, but also to realize that an ABLE account can be used in conjunction with other planning tools, such as a special needs trust, to craft a strategy that best fits your child’s needs now and in the future. Even as just one piece of a larger puzzle, an ABLE account may be able to offer so much more to your child.
To find out how an ABLE account might benefit your child with special needs, contact The Weeks Law Firm today.