Any day now, and likely come New Year’s Day 2015, there’s a good chance that individuals with special needs (and people who care about them) will be able to set up an ABLE Account (stands for Achieving a Better Life Experience). We’ve been following the bills (S. 313 and H.R. 647 as amended on 7/31/14) and their unusually promising path (bipartisan and bicameral, by Jove) toward becoming an actual law when Congress reconvenes this fall. When all is said and done, the upshot is likely to be essentially a tax-favored, 529-type plan for the child whose disabilities manifest before age 26 to be used for education, housing, transportation, and the like. In light of its Medicaid-payback-at-death provision, the ABLE Account won’t be a countable resource for purposes of needs-based benefits like Medicaid and SSI (no matter how large it swells over time for Medicaid, but with a $100,000 maximum for SSI). There would be no fancy lawyers, no special “trusts,” no sticker-shock. Too good to be true? Maybe.
Yes, you’re right, being conscientious, I have the angel-on-one-shoulder (being a mom with a disabled child to provide for in the future) and the devil-on-the-other (being a lawyer with a disabled child to feed in the present). Yet, at the risk of sounding self-serving: I urge you to join me and go slow. Let’s consider our options.
Why? Because we’re not only talking about the disabled worker’s funds (called “first-party” money, the kind you’ve always had to spend down or tuck into a Special Needs Medicaid-Payback Trust). We’re also talking about so-called “third-party” money: parents’ money and beloved-wealthy-aunt-with-no-kids’ money, like that. Think, for instance, along the lines of the annual gift-tax-exempt amount—now up to $14,000—that perhaps routinely goes to all the grandkids except the one with the disability. “Aye,” with my apologies to the Bard, “there’s the rub.”
To see or not to see [a lawyer]—that is the question:
Whether 'tis nobler in the mind to suffer
The slings and arrows of outrageous fortune [fending off loss of government benefits with a special needs trust],
Or to take arms against a sea of troubles
And, by opposing, end them [with an ABLE Account instead]. To die, to sleep—
No more—and by a sleep to say we end
The heartache and the thousand natural shocks
That flesh is heir to [especially when the heir has disabilities!]—'tis a consummation
Devoutly to be wished. To die, to sleep—
To sleep, perchance to dream. Aye, there's the rub,
For in that sleep of death what dreams may come,
When we have shuffled off this mortal coil,
Must give us pause.
Hamlet, Act III, Scene i.
So pause, already.
Consider whether an ABLE Account is the best, “noblest” use of the family funds. It may well be the smartest place for your disabled child to put any earned income or savings (as amended, the proposed law would cap the sum-total of contributions at $14,000 per year), but is it the best use of YOUR funds, subjecting them to Medicaid-payback unnecessarily? Please pause before you cancel your appointment with the Special Needs Estate Planning attorney or the Special Needs Financial Planner. No need for a full-blown agonized soliloquy, but pull a Hamlet and hesitate a moment before you shunt your funds or re-designate your life insurance proceeds into an ABLE account instead of the special-needs portion of the estate plan designed to hold a little something extra for the child or adult child with Down syndrome or schizophrenia or autism or CP. Remember, in a Family Trust or other “third-party” estate-plan trust, at the death of the disabled child, the remaining funds do NOT have to be repaid to the government for services provided during that child’s lifetime. Instead, family wealth can extend to the non-disabled children and descendants, or even charities—to help them as they suffer their own slings and arrows of outrageous fortune.
All I’m trying to spare you, and myself, and all the well-meaning grandmothers out there, is that moment of sitting bolt upright in our death-bed, as we shuffle off this mortal coil, (or, OK, more likely, just our regular old bed, one of those dreaded toss-n-turn nights when we struggle to shift the weight of our world from one shoulder to the other) slammed with a regret—unlike so many others—that we could have avoided. I don’t want to take sides, especially at this stage, before the legislation has even passed. At the same time, we want our special needs families to know that if an ABLE Account is there when you wake up one of these days, just remember that hard choices still have to be made. One more, not one less. Figures. But what’s one more arrow, one more of those thousand natural shocks, right? How do you think I got hair like this and still manage to laugh and brush up my Shakespeare?