SPECIAL NEEDS TRUSTS & ABLE ACCOUNTS
Special Needs Planningis an increasingly important focus of mine as an estate planning attorney. Do you have a child or grandchild who has developmental or physical challenges; or may a descendant of yours, to whom you are leaving a portion of your estate, come to have such challenges after your death? Statistics show that one out of eight families has a child who is challenged. I prioritize the inclusion, in trusts that I draw, provisions that provide for how the assets you leave to a descendant will most effectively be employed to address those challenges and most importantly provisions that will protect the assets of the trust being held for the benefit of that descendant needing to be used up before your descendant, or a descendant of your descendant, can qualify for available federal or state benefits. Where a portion of your estate is left in trust for a descendant who has mental or physical challenges, the selection of the appropriate Trustee or Trustees is also particularly important.
“Able” accounts have recently come into being as a very effective tool whereby amounts can be contributed to what is known as an Able account, which is an account akin in many ways to the traditional 529 plan whereby parents and relatives could (and still can) contribute after-tax dollars to an account accruing income tax-free, in order to fund educational expenses of a student; with the distributions from such account, including accrued income, which are used for educational expenses of the child not being included in taxable income. An Able account operates in a similar manner, enabling after-tax dollars, to the extent of $14,000 per year, to be contributed to an Able account; with the principal and accrued income therein thereafter being used to supplement governmental benefits, for the care and comfort of a disabled child, without being included in taxable income. We eagerly support the use of such accounts to augment the lives of disabled family members, and are eager to advise you in this connection.