Should an ABLE Account Be a Part of My Estate Plan?

If you have a loved one with a disability, you may already know that you have to take extra precautions for them within your estate plan. You may have heard of a special needs trust as a common tool utilized in these circumstances. However, in your personal research, you may have also come across an Achieving a Better Life Experience (ABLE) account. Without further ado, please follow along to find out whether you should incorporate an ABLE account into your estate plan and how a proficient estate planning attorney in Putnam County, at the Law Office of Andres D. Gil, PLLC, can work to ensure your loved one with a disability is well taken care of when you are, sadly, no longer around to guarantee this yourself.

What is an ABLE account, and should it be a part of my estate plan?

First things first, an ABLE account is a tax-advantaged account that allows certain individuals with disabilities to save up to $100,000 without losing eligibility for important government benefits programs (i.e., Supplemental Security Income and Medicaid). 

More specifically, qualified individuals may be those with a disability onset date before they turned 46 years old that resulted in marked and severe functional limitations. So, they must also be receiving SSI or Social Security Disability Insurance (SSDI) benefits, or otherwise have a signed disability certification from a licensed physician. 

Then, when you contribute to your loved one’s ABLE account, they may use these funds to cover their qualified disability expenses that are not typically compensated for through government benefits programs (i.e., education, housing, transportation, etc). Of note, though, since this is technically a gift, you may only give $19,000 annually, or $38,000 annually with your spouse, to remain under the federal gift tax exclusion. 

Should I also set up a special needs trust for my loved one with a disability?

It might interest you to know that setting up an ABLE account in conjunction with a special needs trust may provide added benefits for your loved one with a disability. This is because, on the one hand, an ABLE account may provide your loved one with more financial flexibility and independence to spend the funds as they see fit to improve the quality of their everyday life. 

However, you must remember that an ABLE account imposes annual contribution limits, along with a total cap of $100,000. So if you have more than $100,000 to offer your loved one, you may fund a special needs trust with this excess amount of money.  What’s more, you may add non-liquid assets, like a real estate property to secure their housing and other investments to ensure their long-term financial stability. 

In the end, you may trust your loved one to handle smaller, daily expenses on their own by using a debit card connected to your ABLE account. But due to their deemed legal incapacity, you may be more comfortable leaving the management of the higher-value, complex assets placed in a special needs trust with a responsible trustee. Figuring out who should serve this role requires further discussion with your attorney. 

For further legal guidance, please look no further than a talented estate planning attorney in Putnam County. When you work with the Law Office of Andres D. Gil, PLLC, you can trust that you are in good hands. Schedule a consultation with us today.