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What You Should Know About Special Accounts for the Disabled

July 7, 2016

Filed under: Special Needs,Special Needs Planning — Neel Shah @ 9:15 am

 

You may have heard that there’s a new kind of plan out there for savings for disabled individuals, specifically as it relates to long-term care. Some people are under the impression that this is a new version of a 529 plan, but it’s actually a new type of account that is similar in certain ways, especially meant for those who have disabilities. This is known as the ‘Achieving A Better Life Experience’ Act which was signed by Barack Obama in December of 2014. This Law allows individuals with disabilities to have a tax-free savings account in which they can set aside up to $100,000 without jeopardizing their eligibility for government programs, like Medicaid or supplemental security income. shutterstock_165450731

This is known as the ‘Achieving A Better Life Experience’ Act, which was signed by Barack Obama in December of 2014. This Law allows individuals with disabilities to have a tax-free savings account in which they can set aside up to $100,000 without jeopardizing their eligibility for government programs, like Medicaid or Supplemental Security Income.

SSI benefits would be suspended for individuals who have more $100,000 in these accounts, but Medicaid benefits would continue. These ABLE accounts are modeled quite like 529 college savings plan, since interest earned on the savings is income tax-free. Bear in  mind, however, that any contributions to an account like this are not tax-deductible, though.

The funds inside an ABLE account can be used to pay for healthcare, transportation, housing, and education. In order to qualify to have an account like this, an individual has to have a disability that occurred prior to Age 26.

There are annual caps on contributions under the Federal annual gift-tax exclusion. In 2016, this amount is $14,000. If you’d like to talk more about caring for an individual in your family who has special needs, consult with an experienced New Jersey estate planning attorney today.

Best Practices for Passing on Assets to Special Needs Beneficiaries

April 5, 2016

Filed under: Special Needs,Special Needs Planning,Special Needs Trust — Neel Shah @ 9:15 am

The tax code on its own is quite confusing but it can become even more complicated when you’re thinking about leaving behind assets for a special needs beneficiary. One of the most common points of confusion in the U.S. tax code has to do with the gift tax.

While most people are familiar with the basic magic number of $14,000 which is what each individual can give to one other person per year. Some clarification and planning strategies are necessary for individuals with special needs beneficiaries. How you pass on assets to a beneficiary with special needs is critical. Because you do not want to do this in a manner that would compromise that person’s eligibility for government programs. shutterstock_128618072

Special needs individuals frequently rely on government programs to help support them well into adulthood. It’s a good idea to talk over planning opportunities like trusts that can help to provide for an individual with special needs without removing his or her possibility of receiving assets or receiving benefits from these essential government programs. Consult with a knowledgeable estate planning attorney today to see how you can address this issue.

The Right Way to Plan for Your Special Needs Child

February 27, 2014

Filed under: Estate Planning,Inheritance,Special Needs,Special Needs Planning,Special Needs Trust — Neel Shah @ 3:39 pm

Parents of special needs children have unique needs when it comes to estate planning. As a recent article explains, parents of special needs children who have not yet created an estate plan should put it on the top of their to-do list.

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(Photo credit: Wikipedia)

Unlike the majority of non-special needs children, many special needs children will require constant care for the remainder of their lives. Additionally, many special needs children are not able to work or otherwise earn the income necessary to pay for their care. Therefore, planning for a special needs child includes not only leaving the proper amount of resources for procuring the proper care, but also helping to determine how that care will be provided.

However, planning for special needs children is not as simple as leaving ample resources and a plan for that child’s continuing care. This is because most special needs children already receive government benefits to assist in paying for their care. However, these benefits are need-based and will cease if the child no longer qualifies to receive them. Therefore, many parents of special needs children employ a special needs trust. This trust, rather than the child, owns the child’s inheritance. By using this trust, the money is not considered to be the child’s and he or she will continue to receive government benefits.

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Avoid These Common Estate Planning Mistakes

November 7, 2013

Filed under: Beneficiaries,Estate Planning,Retirement Planning,Special Needs — Neel Shah @ 5:49 pm

Estate planning is a field fraught with pitfalls. All too often, estate planning mistakes are discovered after the person who created the estate plan has passed on, so he or she cannot fix the problem or explain his or her intentions. A recent article discusses several estate planning mistakes to avoid.

Naming Special Needs Minors or Adults as Beneficiaries
This is often problematic because special needs individuals often receive benefits from the government. However, most of these benefits are needs based, and may cease if the individual receives a large inheritance. Therefore, gifts to special needs individuals must be structured in a way – such as a trust – that keeps them out of the immediate control of the individual.

Failing to Name a Contingent Beneficiary
Failing to name a contingent beneficiary becomes problematic when the primary beneficiary either predeceases the person who created the estate plan, or disclaims his or her share. In either situation, if a contingent beneficiary is not named, the share would pass in accordance with the intestacy statute under state law.

Naming Your Estate As The Beneficiary on a Retirement Plan
When an individual receives the proceeds of a retirement plan after the death of the plan owner, he or she can take advantage of special IRA “stretch out” provisions. Using these provisions, the beneficiary can structure the inherited IRA to receive distributions throughout his or her life. These provisions do not apply when the beneficiary on the plan is an estate.