Tax Advantaged Special Need Planning Accounts
Traditional Special Need Planning has focused on the establishment and funding of Special Needs Trusts. Since 2014, families and friends can establish ABLE accounts as an additional vehicle for tax efficient savings for individuals with disabilities. Although ABLE accounts can be set up using any state’s program, twenty-one states have established programs, including Florida, Kentucky, Michigan, Nevada, Ohio and Tennessee, states where Dickinson Wright provides services to clients. What is an ABLE account? It is an account established for an individual who is blind or whose disability began before the age of 26.The individual with disabilities is the owner of the account. The total annual contribution to the account is limited to $15,000. Each individual with disabilities may own one account with a maximum amount of One Hundred Thousand Dollars before impacting an individual’s eligibility for SSI cash benefits. What is the advantage of an ABLE account? The earnings on the ABLE account assets are tax free, regardless of whether they are distributed. It is the equivalent of a 529 account for individuals with disabilities. What can be paid from an ABLE account? Qualified disability expenses are any expense related to the designated beneficiary as a result of living a life with disabilities and which can improve the health, independence or quality of life. Funds left in an ABLE account after the owner’s death are subject to Medicaid clawback....
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