Planning for the future well-being of a family member who has special needs is always difficult, especially when it comes to determining how best to leave him or her an inheritance. Those who are incapacitated physically or mentally often rely on some form of government assistance. When cash assistance or medical care is provided for those with disabilities, a sudden windfall of money can lead to long-term problems. Often a person loses the financial assistance until the money he or she received privately is spent down. Special needs trusts have long been considered the only viable option for leaving funds to a disabled person receiving assistance, but now some are benefiting from using an ABLE account as an alternative to special needs trusts.
An ABLE account is a type of savings account that provides the recipient and the family or individual who established the account with numerous tax advantages. These accounts became an option for individuals with special needs in 2014 after the Achieving a Better Life Experience Act (ABLE) was passed. Prior to the passage of the act, families were forced to rely on a special needs trust that was managed by someone who would look out for the best interests of the recipient or find other ways to transfer to property. It was not unusual for family members to make mistakes establishing trusts or leaving property that led to their loved ones being stripped of public benefits such as health care, disability income, and food or housing assistance.
One of the greatest potential benefits of establishing an ABLE account for a loved one who is disabled is the additional freedom the recipient is given. After the account is established, the person with special needs can access those funds through an account he or she creates without having to rely on a relative or court appointed trustee. ABLE accounts are tax free and are not subjected to federal gift taxes, allowing an account to grow interest while simultaneously fostering the independence that many adults with special needs are denied.
Currently, the only individuals with special needs who can obtain ABLE accounts are those who developed their disability before the age of 26. Once the account is established, annual contributions are limited to $14,000 and if there are funds in the account when the beneficiary passes away, government benefits must be reimbursed before being transferred to heirs. Perhaps most importantly, a person who is at risk of being taken advantage of financially does not have a trustee to safeguard those funds when he or she uses an ABLE account instead of a special needs trust.
Deciding What is Right for You
ABLE accounts have numerous advantages and have helped many families secure the financial futures of those closest to them without creating a trust. There are also potential drawbacks that are largely affected by the needs and resources of those who are establishing or utilizing the account. Discussing your personal needs and long term goals with a qualified special needs lawyer is the best first step in the task of deciding what options is right for you. The compassionate attorneys at MMZ Law know how sensitive these choices are and we work with you to select a course of action that benefits your family the most. Contact us today to schedule a consultation at our Claremont, California office so that we can providing the legal advice you need.
BROUGHT TO YOU BY:
MMZ LAW, A PROFESSIONAL CORPORATION
341 W. 1st St. Suite 100
Claremont, CA 91711
MARIVEL M. ZIALCITA is the founder of MMZ LAW, A Professional Corporation, where she practices in the areas of Elder Law – Medi-Cal Planning Asset Protection, Trust & Estate, Special Needs, Conservatorship, Trust Administration, & Probate. Ms. Zialcita is a frequent speaker on trust and estate matters and holds memberships in the State Bar of California, Trust and Estate Section, The San Bernardino County Bar Association, Wealth Counsel and Elder Counsel. She currently assists in the pro bono legal services program at the James L. Brulte Senior Center in Rancho Cucamonga, California. She is based in Claremont but assists clients throughout Southern California.
This information is educational information only and not legal advice.