The parents and grandparents of a disabled person often worry about how to provide for a disabled loved one after they die. Leaving them a substantial sum could endanger their public benefits.
Funding an ABLE account is one way to ensure a disabled person has a decent quality of life while maintaining their eligibility for Medicaid and other public benefits. Contact one of the Virginia Beach ABLE account lawyers at Parks Zeigler to find out how to take advantage of this powerful financial tool. Our special needs planning attorneys can help you prepare for the future.
Why ABLE Accounts Are Important
People with permanent disabilities often receive public benefits entitling them to medical care and sometimes housing assistance and other support. Although these benefits can help the recipient live a fuller life, maintaining eligibility can be challenging. Most of these programs impose income limits and asset value thresholds on recipients.
The result is that people with special needs often must live on very little if they need to qualify for benefits. Special needs trusts can provide money for extras without endangering eligibility. These trusts can greatly enhance a disabled person’s quality of life.
However, a special needs trust must be managed by a trustee, which can limit the disabled person’s sense of independence. An ABLE account is a savings account for a person with special needs authorized by the federal Achieving a Better Life Experience Act. In Virginia, the program is called ABLEnow. An ABLE account allows the disabled person to save and invest money they receive from work, inheritance, or gifts and use it for qualified expenses without having to go through a trustee. A Virginia Beach attorney can help a disabled person or their family establish an ABLE account.
ABLE Account Restrictions
Only people who developed a permanent disability before they turned 26 may open ABLE accounts. Yearly contributions are capped at $18,000 unless the account owner is employed. Contributions are made with post-tax dollars, but the increase in account value is not taxed.
Employed ABLE account holders who are not contributing to any other pension or employer-sponsored retirement plans can contribute a sum equal to their annual earnings or the federal poverty guideline for the preceding year, whichever is less. These contributions are in addition to the $18,000 all account holders can contribute. Employed ABLE account owners should consult a Virginia Beach attorney about managing the funds they earn through employment.
Only $100,000 can be deposited in an ABLE account when the person receives SSI benefits. Any account balance in excess of $100,000 is counted toward SSI eligibility. This is a federal rule, and the amount changes periodically to account for inflation. Virginia caps the allowable balance in an ABLE account at $550,000, and this amount is also subject to periodic adjustment.
Account Can Be Used for Qualified Disability Expenses
The funds in an ABLE account can be used only for qualified disability expenses (QDE), which means expenditures related to the disabled person’s health, independence, or quality of life. The definition of QDE is broad, but it is always wise to consult a Virginia Beach ABLE account attorney if there is doubt about whether an expense qualifies. Improper use of the funds can have significant tax consequences.
The funds can be used for housing, education, and medical care. They can be used to upgrade a wheelchair or buy and care for a trained service animal. Home renovations, an adapted vehicle, and wellness activities such as a massage, a meditation class, or participation in a sports program for people with disabilities are appropriate uses for the funds. ABLE account funds also may be used to pay for legal and accounting fees, financial planning, and other administrative support.
Funds in an ABLE account cannot be inherited. If the account owner dies, the unspent funds in an ABLE account go to the Medicaid program to reimburse services the disabled person received over their lifetime.
Work With a Virginia Beach Attorney to Establish an ABLE Account
An ABLE account is a tax-advantaged way for permanently disabled people to save and invest money. Together with a special needs trust, these accounts can ensure a disabled person has a decent quality of life and as much independence as their condition allows.
Speak with a Virginia Beach ABLE account lawyer at Parks Zeigler to learn more. Reach out today to schedule a consultation.
