With ABLE Act, families with disabilities get new plan for assets
Alexander Soule for the Stamford Advocate
Published 1:00 am, Sunday, February 8, 2015
Dana Velander, center, and her fiance David Mott pose for a photograph with Executive Director Lolli Ross, in reflection at left, at the Abilis office in Stamford, Conn., on Thursday, Jan. 29, 2015. A federal law was recently passed that was based on the college 529 plans, where people with disabilites can now have up to $100,000 in their savings while still getting federal entitlement money. Photo: Jason Rearick / Stamford Advocate
Following White House approval of savings accounts that would allow people with disabilities to save --and shield --money for their life expenses, the Connecticut General Assembly is considering a raft of bills that would enable the accounts here.
In December, the U.S. House of Representatives passed the Achieving a Better Life Experience (ABLE) Act, which allows families to create savings plans to sock away money toward the care of family members with disabilities, whether children or adults, to age 55. To qualify, beneficiaries must have suffered a disability prior to age 26.
As the case with college 529 plans that are often cited as a model for ABLE, the new savings accounts would carry tax-favored status.
Trust attorneys and special-needs advocates say many families remain aware of the coming accounts, but expect the word to get out this spring. Connecticut legislators have filed five bills seeking to enable ABLE Acts here.
"We've been thinking about it since it was first introduced," said Lolli Ross, executive director of Abilis, a disabilities services nonprofit with offices in Greenwich and Stamford. "Word is still filtering out."
Proponents are hoping to duplicate the success of college 529 plans, with Connecticut families holding assets in such plans valued at $2.3 billion as of 2014, up from $1.9 billion the year before according to estimates by Morningstar which surveys the industry annually.
More importantly for individuals with disabilities, the ABLE Act is designed to shield funds from being counted toward baseline requirements for Medicaid and other services, with major implications for protecting assets for people with disabilities. To qualify for funding under Medicaid and Supplemental Security Income programs, people with disabilities cannot hold assets of more than $2,000.
"Based on the literature and recommendations of the ABLE Act, it will make a profound difference for the autism community," Dr. Roslyn Burton-Robertson, executive director of Easter Seals Coastal Fairfield County's Stamford office, said in an email. "The ABLE Act allows people with disabilities and their families to set up a special savings account for disability-related expenses. Families can save for medical treatments, for employment training, for job opportunities. All these things they weren't allowed to save in tax-free accounts."
Ross puts it in stronger words.
"For individuals who have disabilities, they have to become impoverished to get benefits," she said.
ABLE accounts can be used to pay for:
• health expenses;
• legal fees;
• job training;
• assistive technology; and
• support services.
"I have not heard much discussion about the ABLE Act yet," said Laura Weintraub Beck, a principal in the Greenwich office of Cummings & Lockwood who is director of client communications. "I certainly have not had any clients or financial advisers I work with ask about them yet, but I suspect that will change.
"There are not many options now for disabled people and their families to set aside assets to help defray care costs while not jeopardizing the disabled person's eligibility for government programs and assistance," she added. "While in the estate planning world we routinely use trusts in this situation to try to provide funds for the supplemental needs of a disabled person, the ABLE account alternative appears to be a good alternative where a trust is either too burdensome or costly. In addition, I expect the income tax benefits of the ABLE accounts will appeal to many disabled people and their families."
Brad Gallant, a partner in the New Haven office of Day Pitney and an expert on special needs trusts, agrees said attorneys, financial planners and families will get better clarity this spring as state legislation proceeds and groups discuss the emerging rules at their annual meetings.
Gallant sees one potential problem with the ABLE Act, in the possibility that people who are able to withdraw funds themselves without the oversight of a trustee could fall prey to misuse of the money whether under the influence of others or through their own volition.
"I've worked for lots of clients for whom this kind of a setup would be great," Gallant said. "And I've worked for lots of clients for whom this would be a disaster."
Still, he sees the ABLE Act as a good option in some scenarios, particularly for anyone looking to set aside initial funds of up to $20,000. In cases involving multiples of that amount, he believes a trust attorney should be involved to ensure a family has considered all its options.
Gallant noted that if properly drafted, special-needs trusts can be structured so their assets do not count against the eligibility requirements for some programs, including Medicaid, though some limitations exist.
He added that Congress is considering a Special Needs Trust Fairness Act that would allow people to set up trusts for themselves, an area of need in situations where an individual with assets gets disabled through injury or otherwise stricken.
Greta Solomon, a trust attorney in the Westport office of Cohen & Wolf, said the financial community is "definitely" reaching out to families, but that the ABLE Act has yet to generate much activity. She expects that to change.
"A few parents have already called me about it, but I do not believe it is widely known," Solomon said. " However, the financial community is definitely reaching out to families."