All the stuff we don’t want to think about: wills, special needs trust, and ABLE accounts
Hot topic! Estate planning for your disabled child. Ok - I’m no expert, but I did just set up a will and special needs trust with the wonderful Jayme Levin-Muriel and Spain, Spain, and Varnett here in Chicago. They specialize in disability law and we found them to be really easy to work with throughout the entire process.
Basically, when a disabled person turns 18 they qualify for disability benefits from the government (called SSI Disability). It is ESSENTIAL that your child does not have a normal bank account set up or else this money could disqualify him from receiving benefits. I repeat - DO NOT SET UP A NORMAL SAVINGS/CHECKING ACCOUNT FOR YOUR DISABLED CHILD because in order to receive disability benefits they must not have too many assets. However - if you’re interested in providng resources for your child, don’t fear - there is a way around this!
If your child was deemed disabled prior to the age of 26, parents can set up a an ABLE account (Achieving A Better Life Experience), that anyone can contribute to. These accounts came onto the scene in 2014. Contributions to an ABLE account are not deductible under federal income tax rules. One major difference - unlike a SNT, the ABLE account can cover housing expenses. There are, however, restrictions on what these funds can cover, but it includes education employment support, transportation etc. You can contribute up to $14k per year as well as a total of $100,000.00 in an ABLE account. The laws change often on ABLE accounts, so it’s important to keep up to date on the rules and regulations regarding them.
You do NOT need an attorney to open an ABLE account. As far as I can tell, you do it online through the state you live in (or another state if yours doesn’t offer ABLE accounts). The following states do not offer ABLE accounts, but you can literally open it in another state and your child will still receive the same benefits: Hawaii, Maine, North Dakota, South Dakota, Utah, Wisconsin. You can learn more (and open an account) HERE.
We did not go the ABLE account route - instead, we set up a special needs trust for our son. A special needs trust MUST be set up before the beneficiary (disabled recipient) reaches the age of 65 (not too complicated). There’s no limit to the amount of funds that can be put in a SNT. SNT’s can pay for anything except for housing and food. And the beneficiary can still receive disability benefits. If you have any additional assets, it’s important that you list the TRUST as the beneficiary (not your child himself) - or else these assets could disqualify him from benefits.
Full disclosure - it cost us about $5000 to set up our will as well as the special needs trust. This IS NOT CHEAP. You can use Legal Zoom to create your own will for under $200. I would imagine it’s more confusing - but the price is right!
To find an attorney who specializes in disability law - click HERE!