The state of Virginia was the first state to approve legislation related to the ABLE Act (Achieving a Better Life Experience) of 2014. The ABLE Act allows a person with a disability, or his or her family to set up a special savings account to cover expenses related to the disability.
This can be a big help in allowing a disabled person or his or her family to save for the future without jeopardizing eligibility for Social Security or other government programs. The savings account is similar to a 529 savings account, allowing savings up to $100,000 for the benefit of a disabled person. These ABLE savings trust accounts will be administered by the Virginia College Savings Plan, with the rules applying to the account:
The primary benefit of ABLE is to prevent a disabled person from losing Medicaid eligibility due to an excess of assets, however there is one caveat. Should the qualifying person die, or is no longer disabled, remaining assets in the ABLE account will be used to pay back the state Medicaid fund.
The amount to be paid back will be based on the amount Medicaid paid the qualifying person after the ABLE account was first set up. This is considered a serious drawback for most families who want to be able to fund a trust for the disabled family member while retaining the right to allow other family members to eventually benefit from the remaining assets in the ABLE account. The stipulation that Medicaid will be paid back in the event the disabled person dies is being fought by the National Academy of Elder Law Attorneys.
There is an alternative to ABLE, known as a Third Party Special Needs Trust. Under a Special Needs Trust, assets are not recoverable by Medicaid at the time of the beneficiary’s death, providing the trust was funded by assets of the parent or other third party, allowing for a secondary beneficiary.
Because of this an ABLE account should not be a substitute for a Special Needs Trust, and should be only a limited substitute for a First Party Special Needs Trust. Although Virginia was the first state to enact ABLE, it has since been enacted in West Virginia and North Dakota and is pending in Kansas. Legislation for ABLE is under consideration in 29 additional states.
If you are considering setting up an ABLE account, it is important to consult an experienced Virginia estate planning attorney who will take into consideration what you want to accomplish for the future of a special needs person and then translate those wishes into the best plan for your situation. Contact the attorneys at Melone Hatley today to learn more!