By Laurie Ohall, BCS and Tampa Special Needs Attorney
As a Tampa Special Needs Attorney, I know that a major concern for families with special needs children is ensuring that their special needs child has the means to take care of themselves if, and when, the parent can no longer provide for the child. Parents may also be concerned with their child losing benefits (such as SSI and Medicaid) if the child should inherit something from their parent when the parent passes away.
One way to help a special needs child who is receiving SSI and Medicaid to save is by using an ABLE account. The Achieving a Better Life Experience Act, which was signed into law by President Barack Obama in December, 2014, expands the tax code under Section 529 to create tax-advantaged accounts for disabled individuals. ABLE accounts are similar to a 529 Plan in that family and friends can contribute up to $15,000 (in 2019) per year into the account. Additionally, the special needs children who work, and whose employers do not have a retirement program, can save up to $12,140 in additional savings from their earnings. It is important to note that, even if a disabled child puts their income into the account, the account does not protect (or reduce) their income for SSI purposes.
It is also important to note that, in order to utilize an ABLE account, the person must have a significant disability that began before the age of 26 years old. Generally, these types of accounts are used for those disabled persons (whose disability began before age 26) who are receiving public benefits such as SSI, SNAP and Medicaid. People who are receiving those types of benefits are limited to the amount of assets they may keep (which usually means no more than $2,000 in cash savings). The money held in the ABLE account is exempt from the $2,000 limit on personal assets for individuals who wish to qualify for public benefits.
The total amount that can be contributed to an ABLE account in one year is $15,000 (for 2019). This may be adjusted for inflation, so if you are reading this after 2019, you should check to see what the limit is for that year. The total amount that can go into one of these accounts during a person’s lifetime (in Florida) is $100,000 (and this amount may vary from state to state). If the account goes over $100,000, the special needs child may lose their SSI and/or Medicaid benefits.
Federal law allows Medicaid to have a lien against anything remaining in the ABLE account after the ABLE account beneficiary dies and all outstanding qualified disability expenses are paid. On June 30, 2019, the Florida legislature passed a law removing the ability for Medicaid to automatically have a lien against the proceeds remaining in the ABLE account. Instead, the proceeds would be paid to the ABLE account beneficiary’s estate (which means it has to go through a probate process in Florida which you can read about here – https://ohalllaw.com/probate/).
While the Florida legislature touts this as a positive, I would argue that it really doesn’t change much. Why? Because the family will have to spend, at a minimum, $231 to get the proceeds in the account (the minimum fee for a probate procedure known as “Disposition of Personal Property Without Administration”) and at a maximum, they would have to spend around $4,000 in attorney fees and costs to obtain the proceeds through the probate process. Additionally, creditors (including Medicaid) have the right to file a claim against the estate, so there is still the potential for Medicaid to have a claim against the monies in the account if the account owner is over the age of 55 when they die (in order for Medicaid to have a claim against a decedent’s estate, the decedent must be over the age of 55 when they die).
If you have any questions about this or other estate or special needs planning issues, call our office at 813-438-8503 for a free phone consultation with one of our attorneys.