Monday, May 11, 2015
I have previously discussed the ABLE Act, which provides a vehicle for families to save for the future care of their loved one with a disability through an account made available by similar legislation for 529 plans. One of the greatest benefit's of ABLE's passage is that it brings awareness to the importance of saving for a disabled child. An often overlooked issue affecting families with special needs children is saving for the future without jeopardizing eligibility for supplemental security income benefits. A person can often be disqualified from receiving these government benefits if they put more than $2,000 into a savings account.
There have been two traditional methods of handling this situation. One is creating a special needs trust. A first-party special needs trust is good for people with large sums of money, but it is impractical for people wishing to invest smaller amounts because of the costs of creating and managing the trust. Another method is a “Medicaid spend down,” which involves buying items necessary in order to get the balance of their account below the $2,000 threshold; yet, this remedy can often be wasteful. The new ABLE accounts will hopefully provide a better alternative investment strategy.
See John W. Nadworny, Incorporating the ABLE Act into Special Needs Planning, Journal of Financial Planning, May 2015.
Special thanks to Jim Hillhouse for bringing this article to my attention.