Unlocking ABLE Act Benefits: A Guide for Families with Disabilities

This episode of Advice From Your Advocates Podcast is especially helpful for anyone concerned with financial security for a loved one with disabilities. Join host Attorney Bob Mannor as he discusses upcoming changes to the ABLE Act.

The ABLE Act (Achieving a Better Life Experience) is a program that provides financial support for individuals with special needs or disabilities who are on Medicaid or Social Security Disability. It allows for contributions to an ABLE account, which provides financial support without affecting disability or medical benefits.  In this insightful discussion, we navigate the nuances of providing financial support without endangering Medicaid or SSI benefits.  Hear about the increase in the age limit for eligibility and the empowerment of individuals with disabilities to create their own special needs trusts.

We also explore why the ABLE Act is a great option for families with children or grandchildren with special needs, as it allows for more flexibility in spending compared to a special needs trust.

This episode isn't just a rundown of facts; it's an essential resource for families and professionals seeking to maximize support for those with disabilities. 

Takeaways

• The ABLE Act provides financial support for individuals with special needs or disabilities on Medicaid or Social Security Disability.
• Contributions to an ABLE account do not affect disability or medical benefits.
• It is important to determine disability before age 26 to participate in the ABLE Act program, but changes may be on the horizon
• The ABLE Act allows more spending flexibility compared to a special needs trust. 

Host: Attorney Bob Mannor
Executive Producer: Savannah Meksto
 
Learn more about Mannor Law Group. 

Transcript

Speaker 1: 0:00

You're listening to Advice from your Advocates, a show where we provide elder law advice to professionals who work with the elderly and their families. Welcome back to Advice from your Advocates. I'm Bob Manor. I'm a certified elder law attorney in Michigan, and we today are going to talk about something that is useful information for anybody in the United States, and this is particularly useful regarding someone that has someone with special needs or disabilities, and that is the ABLE Act. So the ABLE Act stands for Achieving a Better Life Experience. It was passed several years ago with the idea of being able to provide financial support for someone that is potentially on Medicaid, potentially on social security disability, particularly if they're on SSI disability, meaning that they've never been able to work, never been able to pay into the social security system, and so this is a really great program that I encourage everybody to at least know about and likely would use at some point if they have someone in their family especially when they're children or someone like that that has special needs and cannot work. Okay, this is regarding the disability program. This is not generally intended for older adults. I know a lot of the conversations that we have on this podcast is about older adults, but this is so important and it couldn't be important to older adults because they have children. They have children with special needs, or you have grandchildren with special needs. This can be very important if you have a grandchild with autism or a grandchild with thousands, or something like that any special needs. Now, right now, the law says in order to participate in this program, you have to have been determined to have a disability prior to age 26. This is a really important element to this and we're going to get back to that, particularly because they've actually made the law a little bit better and in a few years, they're going to change that age at which you have to have been determined the disability by.

Speaker 1: 2:15

But to start off, with what are we talking about with the ABLE Act? What allows you or your parents or anybody who's interested in providing some support to the person with special needs that can't work? Some financial support, and you get benefits too. Okay, so if you contribute money to someone's support, you can put it in the ABLE account, you get a tax deduction and it does not affect their ability to receive disability or medical benefits or things like that. This is so important.

Speaker 1: 2:50

So a lot of times, people don't realize if you've got a child with special needs, you've got a grandchild with special needs and you give them money, you pay for things for them, it could affect their and probably will affect their ability to receive their disability check and the medical benefits. Now some people say, oh, you know, disability checks are so small but the medical benefits are very, very important. Now, why is it so important to know about this? Well, one of the things that I see sometimes with families is that they have a child with special needs, with autism or downs or things like that, and they say, well, you know, my child is going to be on our health insurance through age 26. They were going to support them, but they don't really need. It's not very much money. You know that comes from Social Security disability, so we're not even going to go through that process right now. Well, when we have this age 26 time limit, it's important that we go through that before age 26. So we have that designation, otherwise we won't be able to participate in the ABLE Act, at least under the current law. And so I encourage families, even if they say, well, we don't really want that, we're going to be on, my son's going to be on our health insurance through age 26. Maybe we'll worry about it later, but it might be too late, because you really want to have that. Go through that process, get that designation, so that you can qualify for this program, the ABLE Act.

Speaker 1: 4:19

So why is this so important? Well, what it does is it allows the person with the disability that isn't going to be able to work. It allows them to have some money that's less restrictive than other things. Even if you've ever heard of a special needs trust, you can pay for things out of the ABLE Act account that you can't pay for out of a special needs trust and it won't affect the social security disability. It won't affect the Medicaid program. So this is really for people that have somebody in their family, and who of us don't. It seems like if you have a big family, you're going to have some folks that have some special needs and aren't able to work, but for any family that has someone that really isn't going to have any substantial work in their life, it's not going to be possible. This is a great program. Now should you contribute to it this year? Well, do you need a tax deduction? Maybe you should have contributed to this year.

Speaker 1: 5:18

Sometimes we wait and we say, okay, well, we're going to, as a parent, we're going to make sure we're taking care of our child and we're going to set up a special needs trust for them, because they're not able to work and they can't receive an inheritance. So if you leave an inheritance with somebody on disability, they're going to lose their disability. If you leave an inheritance with somebody on Medicaid, they're going to lose their Medicaid. So the easy way to avoid that is we set up a special needs trust for them. Should we also do an ABLE Act, maybe? Maybe we set up the special needs trust and then the special needs trust can fund the ABLE account. Okay, so that's a really interesting way to do it, because it's easier to spend money out of the ABLE account than it is to spend money out of the special needs trust.

Speaker 1: 6:05

So these are some just really interesting planning things, and I know that some of this can get a little bit confusing, right? Well, that's what we're here for, that's what your elder law or disability law special needs lawyer is there for. Then they can help you through this process to figure out, okay, where should we be setting things up for our loved one. But it is really very important that you do it, because if we don't, then they're going to lose their medical benefits If you leave them an inheritance or the alternative is worse in my view, which is to disinherit your loved one with special needs. I've heard that from lawyers. I've heard that from families where they say well, I was told I had to disinherit my child because they are on disability or they're on Medicaid. No, absolutely you do not need to disinherit them. They will likely need the extra money, probably more than your other children or more than your other grandchildren, and so the idea is to be set it up properly. That's why you wouldn't you know, you presumably would not try to perform your own appendectomy or go to your neighbor to perform the appendectomy. Same thing applies with this.

Speaker 1: 7:18

Sometimes you need to get some expert advice. A lot of people they say oh well, you know, I'm just going to put somebody's name on the account, I'm going to put a beneficiary. That can have very negative consequences if you have someone that has special needs or disability, because that means that they may lose their benefits. So let's talk a little bit more about this ABLE account. The ABLE account was designed. There's 47 different states that have an ABLE account set up. So let's say you're in Michigan, where I'm located, do you have to use the Michigan called my ABLE account? If you choose to, you can. But you could use the Ohio, what's called the Stable Account, st Able Account, and sometimes, in the past at least, I've recommended the Stable Account over the my Able Account for Michigan residents. So you can choose which state has the details that you want. And again, this is where you can get advice from a qualified lawyer, a qualified disability advocate that knows a little bit more about which programs are better, which programs are going to be more flexible.

Speaker 1: 8:23

Sometimes you can get a debit card so it's really easy to spend out of that account. It does provide you with that tax deduction. There is a limit as to how much you can contribute every year and that limit for this year and it just went up, excuse me the limit for this year is $18,000. So you need a tax deduction for putting $18,000 in, but only for one person. For one person with a disability or special needs, they can only have $18,000 contributed to them. So grandma can't contribute $18,000, and grandpa can't contribute $18,000. Now it's going to disqualify the account. So dad can't contribute $18,000, and then have brother contribute $18,000. That's going to create a problem. But if you each want to do nine, that's fine. We can have multiple people do it. It just can't total more than $18,000 in a given year. There is also a maximum amount that you'd want to keep in that account.

Speaker 1: 9:20

I was talking to a family recently and they had set up this ABLE account and they were fairly well to do and they were trying to make sure that they had the special needs, trust and ABLE account and they said well, we want to make sure that we maximize. So every year we're contributing money, we want to make sure we maximize that and we're going to leave it the way it is and have that available for him when we pass. I said no, that's not how you want to use the ABLE account, because there's one negative. There's one drawback and I look at it as one of the very few drawbacks of the ABLE account and that is that if the person with special needs dies and there's money in the ABLE account, that goes to what's called payback, so the state gets a payback for any money that was paid for Medicaid or disability and if there's money left over. So what we want with that ABLE account is we want to spend that money, we want to use that money. So this family that I was talking to kind of had it backwards. They thought they wanted to maximize that, keep that money and then just leave it there. It's the opposite actually. We want to make sure we're spending that money as we go.

Speaker 1: 10:26

Yeah, contribute 18,000? Great. If it gets up to 40,000, 50,000, that's fine, but much beyond that, unless we know that there's a big cost coming up that we are going to need to pay through the ABLE account. I probably would rather leave that in the special needs trust and make sure that the ABLE account doesn't accumulate too fast. Okay, because whatever we can, usually in most of the types of special needs trusts that we do not all of them, but most of the special needs trusts we do do not have that payback provision that says whatever money is left over goes to the state. In most of the special needs trusts that we do we call them third party trusts it will say that when that person with special needs or disabilities dies, whatever money is left over goes to your other family, goes to their siblings, goes to their kids if they have kids, and so that's why we wouldn't want to put too much money into the ABLE account but we want to make sure it's funded as we need it because it's easier to spend out of that ABLE account. So there's a couple of good news things that you're coming up on this One is that it is every year they're gonna adjust that number. So I said for this year it's 18,000 annually that can be contributed. Next year we presume it will go up. It'll go up a little bit every year.

Speaker 1: 11:43

There is a they have passed the law that does not take effect until 2026 and this is gonna be a really good thing because a lot of people are excluded from using the ABLE Act because they weren't determined to be disabled prior to age 26. Now if you were disabled prior to age 26 but weren't determined by the government to be disabled before 26, can you go back and say no, but I have evidence. I was in the different classes in school. I was, I received these accommodations, I had all this other stuff. It is possible, but it's a lot harder at age 40 to go back and say yes, I was disabled at age 18 or age 9 or whatever it is. It's so much easier to do it. You know, at the same time, prior to age 26. But the really good news is, starting in 2026, the age at which you have to become disabled before you can use this program is gonna be risen to age 46. That's gonna open up a whole opportunity for a lot more people where they can have people, contribute to this, get the tax deduction and still have an ability to have some additional resources that aren't going to interfere with their social security disability but their Medicaid, things like that. This is not for everyone, but some states that have their ABLE Act will allow you to have a debit card and in some states the person with the disability could have that debit card.

Speaker 1: 13:17

So we imagine, like with special needs trust, it has to be someone else in charge of that money. That just is the way it is. Has to be somebody else in charge of the money. They fix the law and now the person with the disability can sign the trust, can create the trust, the special needs trust. That was not true for many years, but a couple years.

Speaker 1: 13:36

The National Association of Elder Law attorneys or National Academy of Elder Law attorneys lobbied very hard to get that change, because lots of folks with disabilities and special needs are perfectly capable of managing money. Their special need is physical. And just because they have a physical special need and they're unable to work doesn't mean they can't manage money. Well, they still can't be in charge of that special needs trust. But now at least they can create that special needs trust for themselves. It used to have to be a parent or a grandparent or a court, now the person themselves. What if you don't have a parent or a grandparent and don't want to spend the money to have a court do it, then now you can do it yourself. If you're the one with special needs but you can't be in charge of the money, you have to appoint someone else to be in charge of the money.

Speaker 1: 14:25

Whereas the ABLE Act you can have that debit card, right, you can have that yourself If you're competent. You just have physical restrictions. That makes sense, right? So a lot of times most of the laws say, oh, that person can't have more than a couple thousand dollars, they can't have more than this amount of income. Well, that's, you know, that's really kind of not great for the person's morale, the person's you know self-esteem to say, okay, I'm only allowed to have this much money, I'd like to be able to go on a vacation and be able to buy myself dinner, you know, and with the ABLE account you can do that, and some states allow that. And when I say some states, it doesn't mean the state that you're in, it's mean the state that you set up your ABLE account in. So great program. I really like it. I'm so glad that they did it.

Speaker 1: 15:12

The irony of it is, when this was passed, a lot of the politicians had expressed interest in that.

Speaker 1: 15:19

They thought that by having the ABLE Act, it meant that you wouldn't need to get an attorney to be able to have money set aside for if you had special needs or a non-disability, and so it was sort of designed to be against attorneys.

Speaker 1: 15:33

And the reality is, as attorneys that do this type of work, we're like great, more options. Yeah, we want it, even if it doesn't involve an attorney. We want the right options for our clients, for our folks that we're trying to help, and, guess what? We're able to use it in conjunction with special needs, trusts and things like that. So it's a great option. It's not necessarily something you have to do this year, but I think it's great to educate yourself about it and make sure it's part of your overall plan in helping out, whether it's you that have special needs or disability around social security disability, or if it's someone in your family, one of your children, something like that. So great option, and feel free to reach out to us for more information about the ABLE Act, but that's fun to update you on some of the changes that are coming. Well, thank you for listening, and if you're interested in more topics that we cover through advice from your advocates, don't forget to subscribe.