ABLE Accounts: A Fresh Perspective from an ABLE Program Administrator and Trustee

Transcription

1 2018 National Conference on Special Needs Planning and Special Needs Trusts ABLE Accounts: A Fresh Perspective from an ABLE Program Administrator and Trustee

2 ABLE Accounts: A Fresh Perspective from an ABLE Program Administrator, Attorney and Trustee Steve Dale Dale Law Firm And Golden State Pooled Trust Doug Jackson STABLE Accounts

3 BENEFITS OF ABLE ACCOUNTS Dramatically increases ability to save: BEFORE ABLE NOW WITH ABLE x x Could not save over $2,000 Risk losing health care & other benefits Can save well over $2,000! Keep all your benefits!

4 National Landscape 49 States have ABLE Legislation 38 States have ABLE plans Unique Plans STABLE Account (12 states) ABLE Alliance (13 states) Other smaller partnerships (groupings of 2+ states) Individual States

5 National Landscape As of 6/30/2018. Accounts Nationwide 25,171 Contributions Nationwide $119,985,968

6 ELIGIBILITY Some ABLE plans have an eligibility quiz as a resource on their website Individuals with disabilities that occurred prior to age 26 PLUS ONE OF THE FOLLOWING: Eligible to receive SSI or SSDI due to disability; or Condition listed on SSA s List of Compassionate Allowances Conditions ; or Self certification

7 FUNDING YOUR ACCOUNT (Cash Only) EFT ELECTRONIC FUNDS TRANSFER CHECK

8 FUNDING YOUR ACCOUNT IF NOT EMPLOYED IF EMPLOYED LIFETIME LIMIT $15,000 per year from all sources Up to $27,060 per year Differs by state or program Some ABLE programs automatically rejects excess contributions

9 SSI CONSIDERATIONS Supplemental Security Income 1 Balances over $100,000 count as a resource but SSI merely suspended, not terminated 2 If you hold on to the money from one calendar month to the next, then housing expenditures count as resources 3 Beneficiary s own wages still count as income even if contributed to ABLE Account

10 INVESTMENT OPTIONS Choose from: Four Vanguard mutual funds that range from aggressive to conservative One principal protected FDIC Insured option GROWTH 100% GROWTH 20% GROWTH 10% MODERATE GROWTH MODERATE GROWTH 20% MODERATE GROWTH 25% CONSERVATIVE GROWTH CONSERVATIVE GROWTH 20% CONSERVATIVE GROWTH 5% INCOME INCOME 20% INCOME 40% BANKSAFE BANKSAFE 20% BANKSAFE 20% TOTAL ALLOCATIONS 100% TOTAL ALLOCATIONS 100% TOTAL ALLOCATIONS 100%

11 SPENDING YOUR FUNDS Withdrawals must be used on Qualified Disability Expenses Must relate to the disability + Help maintain or improve health, independence, or quality of life Housing & Rent Basic Living Expenses Transportation Education Assistive Technology Financial Management Health & Wellness Legal Fees and many more

12 SPENDING FROM YOUR ACCOUNT CHECKING & SAVINGS CHECKS DEBIT CARD Transfer to personal checking or savings Third Party check or checking account options Each ABLE plan has different options ABLE Programs will not ask what you spend on, but benefits agencies and IRS can

13 STABLE CARD Are you familiar with??? LOADABLE Does not pull directly from account PROTECTIONS No overdraft, no cash access, limiting of merchants TRACKS EXPENSES Online spending records and annotated expenses ALERTS Notifications to monitor spending, low balances

14 ENROLLMENT Can be done by either: Individual with disability (Beneficiary) or Authorized Legal Representative (parent, guardian, power of attorney) Travis Dresbach STABLE Account Enrollee

15 Example of Eligibility Through Certification ABLE and Mental Health For example, the website states Men tend to get develop schizophrenia slightly earlier than women; whereas most males become ill between 16 and 25 years old, most females develop symptoms several years later, and the incidence in women is noticeably higher in women after age 30. The average age of onset is 18 in men and 25 in women. 1 5

16 What is a Qualified Disability Expense (QDE)? Any expense related to the designated beneficiary as a result of living a life with disabilities Categories are intentionally broad, and include education, housing*, transportation, health care expenses and more If funds spent on a non-qde, expense is subject to regular taxes, plus a 10% tax penalty and benefits may be at risk

17 Where can I open an ABLE Account? Exceptions (for in-state residents only) o Florida (ABLE United) o Georgia (Georgia STABLE) o Kentucky (Kentucky STABLE) o Louisiana (LA ABLE) o Missouri (MO ABLE) o New Hampshire (STABLE NH) o New Mexico (ABLE New Mexico) o New York (NY ABLE) o Tennessee (ABLE TN) o Vermont (Vermont ABLE) o West Virginia (WV STABLE) o Wyoming (Wyoming STABLE) Compare programs o ABLE National Resource Center o are o The Arc ABLE Program Implementation o Individuals may open ABLE accounts outside of their state of residency Alabama (ENable Savings Plan Alabama) Alaska (Alaska ABLE Plan) Colorado (Colorado ABLE) District of Columbia (DC ABLE) Illinois (Illinois ABLE) Indiana (INvestABLE) 24 Iowa (IAble) National Kansas (Kansas ABLE Savings Plan) Maryland (Maryland ABLE) Massachusetts (Attainable Savings Plan) Michigan (MiABLE) Minnesota (Minnesota ABLE Plan) Montana (Montana ABLE) 12 State Nebraska (ENable Savings Plan) Nevada (ABLE Nevada) North Carolina (NC ABLE) Ohio (STABLE Account) Oregon (Oregon ABLE Savings Plan) Pennsylvania (PA ABLE Savings Program) Rhode Island (RI s ABLE) South Carolina ABLE (SC ABLE) Texas (Texas ABLE) Virginia (ABLEnow) Washington (Washington State ABLE Savings Plan) 36

18 The ABLE Act Beyond the Basics 1 8 Presented by WealthCounsel and ElderCounsel

19 On March 8 th,2018 the Social Security Administration Issued Revised POMS on the ABLE Act for SSI Recipients 1 9 Presented by WealthCounsel and ElderCounsel

20 Revised ABLE Act POMS SI Achieving a Better Life Experience (ABLE) Accounts With a special thanks for True Link Financial

21 Revised ABLE Act POMS SI Achieving a Better Life Experience (ABLE) Accounts With a special thanks for True Link Financial 2 1

22 Subsection A 2 2

23 SI Achieving a Better Life Experience (ABLE) Accounts An Achieving a Better Life Experience (ABLE) account is a type of tax advantaged savings account that an eligible individual can use to pay for qualified disability expenses. The eligible individual is the owner and designated beneficiary of the ABLE account. An eligible individual may establish an ABLE account provided that the individual is blind or disabled by a condition that began before the individual s 26th birthday.

24 Medicaid and the Payback Medicaid Recovery ABLE Account 3 rd Party SNT First Party SNT Medicaid used for medical purposes after age 55 Use of an ABLE Program Outside of California The amount of any such Medicaid payback is calculated based on amounts paid by Medicaid No Medicaid payback Must payback any Medicaid used during beneficiaries entire lifetime 2 4

25 Medicaid Lien Upon the death of the designated beneficiary, funds remaining in the ABLE account, after payment of all outstanding qualified disability expenses, must be used to reimburse the State(s) for Medical Assistance (Medicaid) benefits that the designated beneficiary received, if the State(s) files(s) a claim for reimbursement.

26 Subsection B 2 6

27 2. Contributions A contribution is the payment of funds into an ABLE account. Contributions must be in cash and may be made in the form of cash or a check, money order, credit card, electronic transfer, or a similar method. Any person can contribute to an ABLE account. ( Person, as defined by the Internal Revenue Code, includes an individual, trust, estate, partnership, association, company, or corporation.) However, the total annual contributions that an ABLE account can receive from all sources is limited to the amount of the per donee gift tax exclusion in effect for a given calendar year. For 2018, that limit is $15,

28 6. Person with Signature Authority A person with signature authority can establish and administer an ABLE account for a designated beneficiary who is a minor child or is otherwise incapable of managing the account. Signature authority is not the equivalent of ownership. The person with signature authority must be the designated beneficiary's agent acting under power of attorney, or if none, a parent or legal guardian of the designated beneficiary. For SSI purposes, always consider the designated beneficiary to be the owner of the ABLE account, regardless of whether someone else has signature authority over it.

29 7. Program to program Transfer A program to program transfer means the direct transfer of: The entire balance of an ABLE account into an ABLE account of the same designated beneficiary in which the first ABLE account is closed upon the transfer of the funds; or Part or all of the balance to an ABLE account of an eligible individual who is a member of the family of the designated beneficiary.

30 8. Qualified Disability Expenses Qualified disability expenses (QDEs) are expenses related to the blindness or disability of the designated beneficiary and for the benefit of the designated beneficiary. In general, a QDE includes, but is not limited to, an expense for: Education; Housing; Transportation; Employment training and support; Assistive technology and related services; Personal support services; Health; Prevention and wellness; Financial management and administrative services; Legal fees; Expenses for ABLE account oversight and monitoring; Funeral and burial; and, Basic living expenses. 3 0

31 SI Achieving a Better Life Experience (ABLE) Accounts 4. Do not count ABLE account distributions as income A distribution from an ABLE account is not income but is a conversion of a resource from one form to another, see SI B.4. Do not count distributions from an ABLE account as income of the designated beneficiary, regardless of whether the distributions are for non housing QDEs, housing QDEs, or non qualified expenses. 31

32 9. Housing Expenses Housing expenses for purposes of an ABLE account are similar to household costs for in kind support and maintenance purposes, with the exception of food. Housing expenses include expenses for: Mortgage (including property insurance required by the mortgage holder); Real property taxes; Rent; Heating fuel; Gas; Electricity; Water; Sewer; and Garbage removal.

33 SNT to ABLE for Rent Belinda has been disabled from birth, and receives $750 a month in SSI. She is a beneficiary of a self settled special needs trusts. She would like to move to a nicer apartment that would cost $1,000 a month. She will need some assistance in order to make the move

34 SNT to ABLE for Rent If Bob her trustee were to give her $1,000 a month directly it would be counted as unearned income and eliminate her SSI completely. If Bob were to pay the landlord directly the payments would count as ISM and her benefits would be reduced by $270. If instead Bob were to contribute $1,000 a month to her CalABLE Account, and in turn the funds from the account were used to pay the landlord, then there would be no reduction of SSI.

35 Subsection C 3 5

36 Subsection C We clarified the treatment of contributions to an ABLE account. 3 6 Presented by WealthCounsel and ElderCounsel

37 1. Exclude Contributions as Income A payment made into an ABLE account constitutes a contribution. Consider the contribution made by the person to whom the funds belong or are due. Exclude contributions to an ABLE account from the income of the designated beneficiary. Excluded contributions include rollovers from a member of the family s ABLE account to an SSI applicant, recipient, or deemor s ABLE account.

38 1. Exclude Contributions as Income NOTE: The fact that a person uses his or her income to contribute to an ABLE account does not mean that his or her income is not countable for SSI purposes as it normally would be. Income received by the designated beneficiary and then deposited into his or her ABLE account is income to the designated beneficiary. For example, an applicant, recipient, or deemor can have contributions automatically deducted from his or her paycheck and deposited into an ABLE account. In this case, include the income used to make the ABLE account contribution in the applicant, recipient or deemor's gross wages.

39 a. First Party Contributions A contribution made by the designated beneficiary into his or her ABLE account is not income to the designated beneficiary. However, income received by the designated beneficiary and deposited into his or her ABLE account is income to the designated beneficiary. That is, the income is income in the first instance, but the contribution is not income.

40 a. First Party Contributions Examples of payments that might be direct deposited into an ABLE account, but still are counted as income as they otherwise would be, include: Wages; Benefit payments (Title II, Veterans Administration, pensions, etc.); and Mandatory Support payments (child support or alimony).

41 What if the Beneficiary is not on SSI but Getting Medicaid 4 1

42 From CMS Memo For beneficiaries that are only getting Medicaid without SSI we have gotten some guidance.

43 From CMS Memo Some ABLE account beneficiaries may also be a beneficiary of a special needs trust (SNT) or pooled trust, as described in section 1917(d)(4) of the Act. Distributions from such trusts made on behalf of the trust beneficiary to the beneficiary s ABLE account should be treated the same as contributions to ABLE accounts from any other third party.

44 From CMS Memo Thus, while disbursements from an SNT or pooled trust can be considered in some circumstances income to the trust beneficiary's disbursements from an SNT or pooled trust to the ABLE account of the trust beneficiary are not counted as income under section 103. Therefore, states should disregard as income a distribution from an SNT or pooled trust that is deposited into the ABLE account of the SNT or pooled trust beneficiary.

45 Using an ABLE Account with a Special Needs Trust Presented by WealthCounsel and ElderCounsel

46 3 rd Party Special Needs Trusts One huge advantage of a 3 rd party special needs trust is that it is not subject to a lien upon the death of the beneficiary. In addition, a 3 rd party special needs trust can also be a great tax planning device, especially when it conforms to the Qualified Disability Trust rules.

47 3 rd Party Special Needs Trusts Tying these two tools together can allow the trustee of the special needs trust to feed the ABLE Account as needed to; allow the beneficiary more latitude in making purchases and having more control over spending, as well as being able to use the funds for food and shelter and minimize the ISM reduction.

48 A Review of ABLE Programs Across the Nation Presented by WealthCounsel and ElderCounsel

49 ABLE Programs Variations State ABLE programs differ in both financial features and soft features implemented within their specific programs. Programs have differing investment options, state tax deduction policies, annual fees, and more. A comparison of State ABLE programs and their financial features can be found on the ABLE National Resource Center website. Although these financial feature differences prove to be an important aspect of choosing an ABLE program, there are a number of soft features that weigh heavily on the attractiveness of one ABLE program over another. These soft features relate to the behind the scenes usage of the ABLE program and have been reported by account owners as deciding factors for why they chose to enroll in one program or another.

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51 Accessibility to Funds and the Debit Card Feature The accessibility of ABLE account funds is an important facet with regards to their ABLE accounts. Whether an ABLE program does or does not have a debit card feature, with their applicable fees, can easily be found and compared on the National ABLE Resource Center website s comparison tool mentioned prior. Many individuals weigh the debit card feature heavily for both convenience and independence (explain).

52 Accessibility to Funds and the Debit Card Feature Programs that do offer a debit card have different terms of distribution and accessibility to the funds. Some debit cards allow the account owner to access the entire balance of the account through the debit card The full balance debit cards offer a sense of convenience: eliminating the need or worry to monitor the debit card balance and ensure there are enough funds on the card for purchases. Others utilize a loadable debit card: only containing funds manually transferred to the debit card through their online account. The loadable debit card may be beneficial for account users that require more assistance and monitoring that other individuals. This loadable feature allows for self responsibility while also creating an extra level of security in situations where an account may be monitored by a parent or other responsible party in addition to the account owner.

53 Accessibility to Funds and the Debit Card Feature In addition to the funds available through the different debit card features, individual account holders report positive feedback on the journaling feature online in relation to their debit card activity. Several ABLE programs throughout the nation offer an online portal that allows users to track and take notes on each transaction. This feature appears similar to an online banking statement but adds the element of personalized comment space on any transactions coming in or out of the account.

54 Recordkeeping In the past, individuals, families, and/or staff providing financial management maintained hard copies of receipts for audit purposes. This online recordkeeping makes everything digital and records can be maintained for the life of the account. One ABLE plan even provides users with the ability to take pictures of a receipt and attach the image to the transaction for itemized online recordkeeping. Another ABLE plan currently offers separate loadable debit cards, one for the account owner with a disability and one for the Authorized Legal Representative (ALR). This feature is a convenient way to empower the individual with a disability while also providing access to funds to the ALR to make purchases on behalf of the beneficiary.

55 Enrollment and the Self Attestation Feature Many ABLE programs utilize a self attestation feature during registration, which allows the registrant to select a box self attesting the existence of their qualifying disability under perjury of law. This self attestation feature offers convenience to registrants by not requiring individuals to prove their qualifying disability by producing additional documents or requiring registrants to physically drive in to registration offices. Many ABLE programs that do not utilize the self attestation feature require the production of medical documents containing the documentation of a qualifying disability to be scanned, ed, faxed, or mailed. A select few state programs require the physical presence

56 Website Usability The website usability of an ABLE program is another soft feature that may play a role in deciding the best program to fit the needs of an individual. ABLE programs utilize different features within their websites that may be beneficial to users, but also features that may be crucial to a user s ability to navigate the website and its content. A few examples of website features include: the use of screen readers, audio buttons, and the availability of alternative languages.

57 Website Usability Some websites might be more user friendly in overall content by making tabs and desired information clearly labeled and easily understood by the average reader. When considering website navigation, the client s specific needs should be evaluated. An individual with a visual impairment will often be dependent on the use of a screen reader, making the screen reader compatibility critical to the use of the program s website and overall experience of the program.

58 Website Usability For a non English speaking individual, or an individual more comfortable with another language, a Spanish language option, might make the program more attractive than a program without a secondlanguage option. Website navigation can be a minor consideration for many clients, but for some clients these website features may hold the key to their success and comfort controlling and accessing information about their account.

59 Conclusion There are many reasons for an individual to choose one ABLE program over another. The key to helping an individual client is understanding who will be exercising control over the account, whether the individual or a parent, the client s specific needs, and what they intend to use the account funds for.

60 Conclusion The financial features of an ABLE program often get the most consideration because this information is more concrete and readily accessible when researching programs. Given the nature of the ABLE program and the purpose these programs intend to serve, these soft features should be given similar consideration when directing clients to certain programs in order to enhance their quality of experience.

61 Conclusion It is not necessary to know every soft feature and every differentiation between programs, but knowing many of these soft features involved in the ABLE programs will allow a practitioner to inform their clients of the existence of many of these features, allowing clients to consider and make informed decisions when enrolling in an ABLE program that is most beneficial to their needs.

62 Federal Tax Reform Changes to ABLE (Effective December 2017) Rollovers from a 529 College Savings Account into an ABLE Account o Funds will be rolled to an account of the 529 beneficiary or a member of the beneficiary s family Additional Contributions as a Result of Employment (ABLE-to-Work) o Permits working eligible individuals to contribute up to the Federal Poverty Level (an additional $12,060 to the existing $15,000 annual contribution limit, or a total of $27,060 annually) Access to Saver s Credit o Savers Credit will now apply for ABLE contributions o Contributions limited to $2,000 per beneficiary (income limits apply) All three provisions sunset after 2025