living longer living healthier living better than ever before
welcome to Mountain-Pacific's Healthy Living for Life a weekly series that
gives you the information education and expert insight you need to become an
active participant in today's ever changing health care climate here now is
today's program hosts a new type of savings account is creating more
opportunity and changing the lives for those with disabilities and for their
friends and families today we'll learn about these savings accounts and trusts
and how they may be able to help if you or a loved one qualify
welcome to Healthy Living for Life a show dedicated to helping you do just
that I'm Sara Medley your host you won't want to miss this show stay tuned
welcome back to Healthy Living for Life joining us is attorney Heidi Goettel
who's here to discuss ABLE accounts and special needs trusts thanks Heidi
for being on our show thanks for having me let's start by defining what is an
ABLE account an able account ABLE stands for Achieving a Better Life Experience
Act so Congress enacted an act to enable people to have tax advantaged accounts
an ABLE account it's a lot like a 529 college savings account in that people
contribute to the accounts tax-free or after tax and it grows in the account
tax-free and then you can take out distributions for qualified expenses
without incurring tax on it so a 529 college savings account is for qualified
educational expenses a 529 A or ABLE account is for qualified disability
expenses so that's the main difference is what kind of expenses you can have
that tax advantage from the there are some state and federal level tax
deductions as well potentially available for contributions to both 529 college
savings accounts and ABLE accounts so what it really did was
extend the benefits of the 529 accounts to people who might not have traditional
college education expenses but who if they were able to save up over time and
have investments could have different kinds of expenses which may include
education but also things related to disabilities that would help them
improve their quality of life for example something like an accessible
transportation a wheelchair accessible van that they need to save up overtime
to be able to purchase but could really improve their quality of life and the
new 2017 federal tax act actually allows people with existing 529 college savings
accounts to be able to potentially roll over into an able account so if someone
who has disabilities has a 529 account and it would be better for them if it
was more flexible in a 529 A ABLE account for disability related expenses
they could potentially convert that without penalty under the new regulation
so it's really designed to be flexible and expand those benefits of that
particular kind of account the other really important feature about an ABLE
account is that it does not count toward eligibility limits for need-based public
benefits like Medicaid and Social Security income so people can have
savings to supplement those kind of benefits Medicaid is a government health
insurance program that's based on financial need and SSI Supplemental
Security Income is a basic income provided by the federal government
that's also need-based and the eligibility limit for both of those
programs is only $2,000 and so people need to work hard and sometimes it's
challenging to stay below the $2,000 countable resource limit in order to
maintain eligibility for those programs that are really valuable for them and
that they really rely on for their care and support so congress has recognized
that $2,000 which hasn't been increased for 30 years and isn't indexed
for inflation really isn't sufficient for people to have a dignified quality
of life if that's all the savings you're permitted to have and so in in
acknowledging that congress has made some exceptions so that certain things
don't count toward that limit and one of the things that doesn't count now is
your savings in a qualified ABLE account
so let's talk about the hows how does one set up an ABLE account so there's a
website that you can go to it's online at Montana ABLE and it's listed on the
screen it's savewithable.com and if you visit that website it has all the
information you need to know and guides you through the steps to set up and
create an ABLE account so can anyone set up this account so
imagine a grandparent that might want to set up an account for a grandchild can
they do this yes they can so ABLE accounts are limited to qualified
beneficiaries they have to have a legal disability and be and that disability
has to have arisen before the person turned age 26 but assuming that you have
a qualified ABLE account owner other people both the account owner can
contribute their own income but also like you say grandparents and friends
can make contributions to the account for them everyone's able to have one
ABLE account so everyone will be contributing into the same account you
talked about some of what can be used out of the fund so one of the things you
mentioned was the wheelchair I believe so what other examples are there of what
you can buy with the funds out of that account the definition of qualified
disability expenses is really broad so it's really anything there are a few
limitations but generally anything that will help a person with disabilities
improve their quality of life so accessible devices entertainment health
and wellness expenses that aren't insured housing transportation even
legal fees and financial management employment training and
support personal support services companionship oversight and monitoring
of the ABLE account itself so assistance with those kind of financial matters and
also funeral and burial expenses when needed so when the remaining seconds are
gifts to ABLE accounts subject to a gift tax the gift tax wouldn't typically
apply to gifts to an ABLE account there within the annual exclusion which is
$15,000 from gift tax reporting or gift tax applying okay thank you so much
Heidi coming up next we're going to talk to someone who is benefited from an ABLE
account and then continue our discussion with Heidi we'll be right back
welcome back joining us now is Jon Bennion who has a son with special needs
and was involved in the ABLE account legislation in Montana he also is an
attorney for the Montana Department of Justice welcome to our show Jon thank
you is an ABLE account a new type of account I've never heard of it before
they are relatively new that was something that was passed by congress at
the end of 2014 and when I learned about this new opportunity I found out that
states have to pass enabling legislation and that was right before Montana's
legislature was going to meet in 2015 so we knew we had to act pretty quickly to
put something together tell us how you did that how were you involved in the
legislation in Montana so I reviewed what were the requirements of the
federal bill and then I kind of looked for a model out there that we could use
for the legislation in Montana one of the models was the 529 tuition savings
accounts so we kind of patterned it after that took some of the language
from that and then we had experts review it from the tax world from from the
disability world and we were able to put some language together was getting it
passed through the legislature difficult it's never easy to pass legislation but
I think once people understood what we were trying to accomplish there was
incredible bipartisan support for something like this ultimately what it
really ended up being difficult to find was a home for it which agency was going
to oversee it because there was no appropriation made for it so we we
wanted to make sure that the agency that was going to be responsible for it could
take it on so which agency is responsible for this the Department of
Public Health and Human Services provide some oversight and then I sit on a
Oversight Council that has four other people on it some some parents of people
with disabilities people involved in DP HHS
or from the Department of Administration and we've helped implement the program
how many people in our state are going to benefit from this legislation there
could be thousands of people that could take advantage of this and what we're
trying to do is get the word out on it because it's very important to be a new
tool something different that hasn't been there in the past that people can
take advantage of and what we're up against right now is just making sure
that people are aware that it exists and how it can benefit either them or their
families so switching to a more personal note would you mind talking about your
son and his disability and what that entails sure our son Jack he was a 23
week micro preemies so he was born about four months early that a lot of people a
lot of babies born that early just really struggle to survive and then even
when they do make it there's a lot of odds stacked against them so we knew
that even if he was going to make it that he would potentially struggle with
some disabilities down the road we didn't understand the full extent of
those until he was probably three or four and we know now that he may not
live independently and so it was important for us to have a variety of
tools a variety of ways to make sure that he could have the best life
possible he's an incredibly happy kid he loves school he loves his classmates and
so we want to make sure that down the road he can continue to lead a happy
life how old is Jack now Jack is eight years
old almost nine he's a second grader in elementary school now and like I said he
loves school loves his classmates how will the funds from his ABLE account
help him so it's it's something in addition to public assistance if he ever
requires public assistance in the past it's been a barrier to save your own
money or to have people help you save money towards things that public
assistance doesn't cover sometimes transportation costs
medical costs that aren't covered by Medicaid education costs so opening that
door for people to save their own money or to have families save their own money
without being penalized is really opening a lot of doors for people with
disabilities switching to the military will this type of account benefit folks
in the military in any way absolutely it can depending on the federal requirement
so somebody must have their disability before the age of 26 and that's in
federal law so people should definitely check out the eligibility requirements
and see if they fit within the those requirements for an ABLE account talk
about who can contribute to an ABLE account is that anyone can contribute
yes anyone can contribute there are caps overall in in a year and then caps over
all that can be in an account but there are also certain contributors that can
take advantage of a tax deduction a state tax deduction and those are
usually close family members so talk more about what the ABLE account will do
for your son so could you be a little more specific and for example are you
using funds right now for your son sure that's a great question right now we're
not using the funds for anything we're using it much like a college tuition
savings program where we're putting the money away investing it and for a time
where later if he does need something with transportation with medical costs
education expenses anything like that then we're ABLE to have some money set
aside for him but other people that may be employed they they are an adult
they're just trying to get to their job they're trying to live a fruitful life
they may use it more like a checking account where money goes in they're able
to take it out and not invest and the great thing about able accounts is that
there's a lot of options available for that whether you want to invest it for
down the road or use it more month-to-month so lots of
flexibility related to the ABLE look yes so when Jack was three or four we
went and visited with a law firm about setting up a special needs trust and one
of the things it's kind of complicated to set those up ABLE accounts are very
easy to set up anybody can go to the website and within a half-hour set one
up for for themselves or a family member thank you so much we need to take a
break but coming up next we'll continue our
discussion with Heidi Goettel stay tuned
welcome back we're continuing our discussion with attorney
Heidi Goettel about ABLE accounts and trust that can help adults with
disabilities thanks again for joining us Heidi thank you we left off talking
about ABLE accounts Medicaid has a look-back period I think that's the last
five years of financial statements are reviewed is an ABLE account exempt from
that look-back it can be so contributions that you make of your own
funds whether from income or social security or gifts or inheritance that
you transfer into a qualified able account those would be exempt from the
five year look-back period for the account owner some gifts by relatives
there are certain exceptions to the five year look-back period that might qualify
for a disabled adult child if you make contributions for the gift donors five
year look-back period for Medicaid but for other gifts by third parties into an
account by friends or family that would be subject to the five year look-back
period for that own person the person who made the gift if they needed
Medicaid down the road the five year look-back period for them would take
into consideration the contribution to someone else's ABLE account okay so
let's say I'm on Medicaid and I have an ABLE account and I die there are funds
remaining in that account do the funds that are left over have to be returned
to Medicaid they do so there's what's called a Medicaid payback requirement
for an ABLE account and when the beneficiary when the account owner dies
they figure out how much Medicaid has paid on behalf of that account owner
during their lifetime and the remaining funds and the ABLE account go toward
reimbursing Medicaid for those expenses and then if there's any balance after
that it would go to the account owners designated beneficiaries or into their
estate so we're going to switch gears a bit and we're going to talk
about special needs trusts so tell us about those and how are they different
from an ABLE account so a trust and a special needs trust as a ownership and
management arrangement for funds so a trustee owns and manages property for
the benefit of a beneficiary the beneficiary of the trust and that can be
held in different kinds of investments that the trust property can be held by
the trustee in investments or accounts and so it's different from an ABLE
account because an ABLE account is a particular kind of account and it's
owned directly by the account owner whereas a trust is owned for the benefit
of the account owner by a trustee so the the way that they're similar is that a
special needs trust is also a kind of exempt asset from that $2,000
resource limit so special needs trusts are there different kinds but they're
used also to help people have additional sources of income and assets in addition
to public benefits like Medicaid and Social Security without losing
eligibility for those important benefits are there age restrictions for the
beneficiary of a special needs trust there are two different kinds of special
needs trusts primarily one is set up with a person's own fund so a gift or
inheritance or like funds in an ABLE account those are called self settled
special needs trusts and those can only be created for people under age 65 third
party special needs trusts that are funded with not the beneficiary's money
but a third party say someone who made a gift a family member who left their
estate to a person with disabilities those don't have an age limit for the
beneficiaries age what can be bought or paid for out of the special needs trust
with the self settled special needs trusts again any kind of qualified
expenses that help people have a better quality of life with some
limitations if distributions are made from a self settled special needs trust
for housing or food that can impact their the calculation of their
supplemental security income benefits so generally we avoid making distributions
from trusts for housing and food but pretty much any other kind of expenses
that are directly for the beneficiary are permissible from that kind of trust
third-party special needs trusts are more flexible and can really be used for
anything that will improve the welfare and quality of life of the beneficiary
of that kind of trust including housing and food and other things that could
still impact their SSI calculation but but aren't as limited that way does a
special needs trust have a limit as to how much can be contributed into it it
is unlimited how much could be contributed into a special needs trust
if it's qualified and continues to be have that exempt resource treatment it
has an unlimited amount that can be in it we talked earlier about how to set up
an ABLE account how does someone set up a special needs
trust so generally you would work with an attorney who is knowledgeable about
public benefits and trusts law it can be kind of complex to establish a trust
document that governs that arrangement and to properly fund the trust by
retitling accounts or changing beneficiary designations so it would
usually be advisable to work with an attorney to set up trust
so speaking of attorneys what if an individual does not have the means to
afford an attorney what do they do well many attorneys will act pro bono for
certain circumstances for people with financial need or there's a modest means
program so they might have a reduced fee for their services so that it can make
it more affordable there also of Montana legal services can help
connect people with pro bono legal services and the State Bar of Montana
has a specific modest means program where attorneys have signed up who are
willing to work at reduced rates for people who can't otherwise afford it
Thank You Heidi and thank you Jon for being on our show we hope you'll be back
next week until then stay fit stay well and stay healthy for life with Healthy
Living for Life
Healthy Living for Life is brought to you by Mountain-Pacific Quality Health
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