ABLE Act – On December 16, 2014, Congress passed the Achieving a Better Life Experience (ABLE) Act, which promises to help individuals with disabilities and their families to save for disability-related expenses and proactively plan for their futures.  The President is expected to sign the Act any day now.  The ABLE Act will allow a single tax-free savings account to be established for individuals who became disabled before the age of 26 years.

These individuals will be able to save up to $14,000.00 per year to pay for future health-care costs, housing, life-long education, transportation, and other necessary expenses.  The accounts will resemble 529 College Savings Plans.  Anyone can contribute to an individual’s ABLE account, as long as the total distributions do not exceed $14,000.00 annually.  Additionally, individuals will not forfeit their eligibility for Medicaid, Supplemental Security Income (SSI), or other “means-tested” government benefit programs, as would be the case under existing law, which only allows for savings of $2,000.00.

The maximum amount an account can hold as an excluded resource is $100,000.00.  If the ABLE account surpasses $100,000.00, SSI payments will be suspended.  Another important detail regarding the account is that funds remaining in the account at the death of the beneficiary must be paid to the state up to the amount of benefits that Medicaid provided to the beneficiary after the account was established.  For this reason, the ABLE account is not a substitute for a special needs trust a family can establish to receiving funding from life insurance or other assets at a parent’s death, which does not require a payback.  The ABLE account is, however, an important and positive new tool for individuals with disabilities.

A form of this legislation has been presented to Congress for at least the last seven years.  While the final Act differs in many respects from its original version, special needs lawyers and planners, as well as individuals with disabilities and their family members, are celebrating this new legislation.  More news regarding the details of the Act will follow soon in a later edition of The Voice.

Military Survivor Benefit Plan Pension Payments May Be Paid To a Special Needs Trust. On December 12, 2014, Congress passed important legislation allowing a veteran who retires from military service to elect for a portion of his or her monthly annuity to be paid directly into a special needs trust created for the sole benefit of the veteran’s adult child with a disability.  This legislation is the result of a lobbying effort that began in April 2009.

Upon retirement, a veteran of the United States Armed Forces begins to receive retirement income and, absent another valid election, is enrolled in the Survivor’s Benefit Plan (SBP).  With a full election of the SBP, up to 55% of the retiree’s retirement pay can be paid to a spouse or dependent child. A dependent adult child means he or she has a disability that occurred prior to age 26 and prevents him or her from being capable of self-support. The SBP election allows the retiree to provide a continuous income stream for the adult child when the retiree and any surviving spouse have both passed away.

This legislation was proposed because the SBP payment typically creates a dilemma as to whether to take the income stream or risk losing the “means-tested” government benefits, such as SSI and Medicaid, of the adult child.  The SBP payment has only been allowed to be payable directly to the child with a disability, not to a trust for his or her benefit.  As a result, SSI payments, which are reduced dollar-for-dollar by every SBP dollar in excess of the first $20.00,  were often eliminated entirely, which usually caused termination of Medicaid, too. In this scenario, the retiree was forced to determine whether the benefit of the SBP income for the child exceeded the loss of  SSI and Medicaid.

While a retired service member’s adult child with a disability may be permanently eligible for military post benefits and health benefits under TRICARE, these benefits may not provide the entire range of services necessary for that adult child’s care.  Specifically, while TRICARE provides acute care services, it does not provide the long-term care and waiver services covered under the Medicaid program.  As a result, various programs provided through Medicaid have been lost, which exposes the child to extensive out-of-pocket costs to meet his or her needs.

This new legislation, found at §624 of the National Defense Authorization Act, amends the present SBP provisions to allow the monthly SBP annuity to be paid to “a supplemental or special needs trust established under subparagraph (A) or (C) of Section 1917(d)(4) of the Social Security Act.”  Just like the ABLE Act account, this form of special needs trust does require a payback of any proceeds remaining in the trust at the child’s death, up to the amount of services that Medicaid provided to the child.

Parents in the military who have children with special needs will want to review their previous elections and update their estate plans as a result of this new legislation.  Again, this is a very positive development for the special needs community.

This article was prepared by Katherine Barr, who is appreciative of the use of materials provided by Andrew Hook and Janet Lowder of the Special Needs Alliance.