Supplemental Needs & How to Pay for Them

Hands of mother and daughter

If you are the parent or guardian of a dependent under the age of 26 with supplemental/special needs have you opened up their Trust and ABLE accounts?

Trusts ensure that your dependent(s) (see qualifications guidance #1 and #2) with blindness or diagnosed conditions lasting 12 months or longer whose onset occurred before the age of 26 will continue to receive financial support after you have died without jeopardizing their monthly Supplemental Security Income (SSI) and Medicare and Medicaid benefits.

If the dependent were to receive a lump sump cash gift from their guardian’s estate that gift would make them ineligible for the above-mentioned federal (Medicare) and state (Medicaid) benefits because any cash-holdings over $2,000 suggests that they are not needy enough to receive the monthly benefits.  Any large sum of money gained in the short term would be quickly depleted with exorbitant medication and related costs.

State-governed ABLE accounts allow the qualified individual or their guardian to use post income tax dollars to pay for qualified disability-related expenses tax free thus preventing double taxation on those expenses and makes withdrawing funds tax free as well.  Anyone can contribute to the individual’s ABLE account but the sum of all gifts in any given year cannot exceed $14,000.  Individuals and guardians can purchase ABLE accounts in any state (not every state has an ABLE program) and they are subject to nominal administration fees.  Funds in ABLE accounts earn interest.  ABLE account funds in excess of $100,000 may reduce or suspend SSI benefits.

Both Supplemental Needs Trusts and ABLE accounts can also be used with employer Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA) with use pre-income tax dollars to pay for medical expenses.

Contact Montgomery Business Solutions if you would like help coordinating with your lawyer on opening a Supplemental Needs Trust or if you would like us to help in opening an ABLE account, such as Virginia’s affordable ABLEnow.

 

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