Equip for Equality… Advancing the Human & Civil Rights of People with Disabilities in Illinois
Disability Rights Consortium Meeting 12/9/15
REQUIRES
SPECIAL
NEEDS
TRUSTS
Where from ?
How to
NOT lose SSI or Medicaid?
2 Versions...
 Reserve
 Supplemental Fund
 Over & Above
Government Benefits
 No $ limit
 Federal
 State


THEN
UPON
BENEFICIARY
PASSING…
INHERITANCE
GIFT
INSURANCE
IRA
401K
Beneficiary’s own assets,
UTMA, Child Support
FAMILY
CHARITY
GUARDIANS
WHAT ABOUT GIFTS ?
BENEFICIARY
…consider spending it down on allowed
expenditures, such as:
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COMPUTER, TV, DVD PLAYER…
VACATION
PRE-PAID FUNERAL
PAY OFF DEBTS… EVEN TO PARENTS…
CLOTHES
BUT MUST BE FOR HIS/HER
SOLE BENEFIT…
• So if:
1. working (FICA being withheld) &
2. on SSDI, not on SSI, & only Medicaid is the
issue, then
under HBWD,
 “OBRA 93 Trust”…
 “(d)(4)(A) or (C) Trust”
 “PAY BACK Trust”
 because…
st
1 Party Special Needs
Trust
Medical
Malpractice
Personal
Injury
Inheritances
& Gifts NOT
to 3rd party
SNT
Special
Needs
Trust
His/Her own assets,
such as savings bonds,&
Then
upon
passing…
any left
only then:
FAMILY
CHARITY
GUARDIANS
Only if not 65
 Only by Parents,
Grandparents, Courts &
Guardians... NOT self…
SSA Position...
Courts often require...
Pay Back...


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THE ILLINOIS MARRIAGE
& DISSOLUTION OF MARRIAGE ACT
… child is mentally or physically
disabled
… an application for support MAY
be made before or after the child
has attained majority
… to supplement SSI
or offset?
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
COMMON ATTORNEY MISTAKES!
is an
ABLE Account
an option?
Just like a 529… NOT!
Federal Legislative History
First introduced in Congress in 2007
Re-introduced in each Congress thereafter
HR 647 – passed on 12/3/14 (404-17)
S 313 – passed on 12/16/14 (76-16)
Signed into law – 12/19/14
ABLE ACT, but the technically correct name
is “The Stephen Beck Jr., Achieving a
Better Life Experience Act of 2014”…
 which actually is buried in “The Tax
Increase Prevention Act of 2014”…
 which actually is P.L. 113-295.
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Illinois’ enacted…
 15 ILCS 505/16.6
 P.A. 99-145
 Effective 1/1/16 “sort of”
 The State will NOT allow
accounts until after the
“Final Treasury
Regulations” are published!
ABLE Account an option?
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Not available in Illinois until “Final IRS Regs”!
Maximum $14,000 a year from all sources!
Disability onset prior to age 26!
Only one account per beneficiary!
Beneficiary is owner and in control!
Over time $14,000 a year but not more than $100,000 for
SSI, & never more than $350,000.
But, limited on how can spend! Penalties & tax!
Pay back on death so not for 3rd party contributions.
Tax free? SO WHAT!
What if Beneficiary has Guardian or is a minor?
Who Qualifies?
1. Persons diagnosed as “disabled”
before age 26
receiving SSI or
SSDI… [§529A(e)(1)(A)]
2. Persons diagnosed as “disabled”
before age 26
certified as meeting
conditions similar to that required
by SSI or SSDI… [§529A(e)(2)]
Qualified Disability Expenses
–
–
–
–
–
–
–
–
–
–
–
education,
housing,
transportation,
employment training and support,
assistive technology and personal support
services,
health,
prevention and wellness,
financial management and administrative
services,
legal fees,
expenses for oversight and monitoring,
funeral and burial expenses.
Qualified Disability Expenses
 Per Proposed Treasury Regulations
– List of permitted allowable expenses are
not exhaustive and should additionally
include basic living expenses
– Disability related expenses should be:
• construed broadly;
• may be attributed to the designated beneficiary’s
health, independence and quality of life;
• should not be limited to items for which there is
a medical necessity;
• and may include expenses which could benefit
individuals in addition to benefiting the
designated beneficiary… so not sole benefit as a
d4…
What if beneficiary lacks
capacity?
The proposed regulations clarify that,
if the eligible individual cannot
establish the account, the eligible
individual’s agent under a power of
attorney , if none, his or her
legal guardian may establish the ABLE
account for that eligible individual.
But… the Illinois statute is different:
Illinois’ ABLE Act
15 ILCS 505/16.6 (P.A. 99-145, eff. 1-1-16)
Sec. 16.6(a):
… "Designated representative" … The State Treasurer shall
recognize a person as a designated representative without
appointment by a court in the following order of priority:
(1) The account owner's plenary guardian of the estate, or the
account owner's limited guardian of financial or contractual
matters. Any guardian acting in this capacity shall not be
required to seek court approval for any ABLE qualified
distributions.
(2) The agent named by the account owner in a property power
of attorney recognized as a statutory short form power of
attorney for property.
(3) Such individual or entity that the account owner so
designates in writing, in a manner to be established by the
State Treasurer.
(4) Such other individual or entity designated by the State
Treasurer pursuant to its rules.
Can a Traditional 529 Plan be Rolled
into an ABLE Account?
The Treasury Department and the IRS have
been asked whether a qualified tuition account
under section 529 may be rolled into an ABLE
account for the same designated beneficiary
free of tax.
Because such a distribution to the ABLE
account would not constitute a qualified higher
education expense under section 529, the
Treasury Department and the IRS do not
believe they have the authority to allow such a
transfer on a tax-free basis.
Food/Shelter
under
Federal
Able…?
(a) Account Funds Disregarded for Purposes of Certain
SEC. 4. TREATMENT OF ABLE ACCOUNTS UNDER CERTAIN FEDERAL PROGRAMS.
Other Means-Tested Federal Programs.--Notwithstanding any
other provision of Federal law that requires consideration of 1
or more financial circumstances of an individual, for the
purpose of determining eligibility to receive, or the amount of,
any assistance or benefit authorized by such provision to be
provided to or for the benefit of such individual, any amount
(including earnings thereon) in the ABLE account (within the
meaning of section 529A of the Internal Revenue Code of
1986) of such individual, and any distribution for qualified
disability expenses (as defined in subsection (e)(5) of such
section) shall be disregarded for such purpose with respect to
any period during which such individual maintains, makes
contributions to, or receives distributions from such ABLE
account, except that, in the case of the supplemental security
income program under title XVI of the Social Security Act, a
distribution for housing expenses (within the meaning of such
subsection) shall not be so disregarded, and in the case of
such program, only the 1st $100,000 of the amount (including
such earnings) in such ABLE account shall be so disregarded.
 One question the Proposed
Regulations did NOT answer is
whether utilization of expenses
for food and shelter will cause
the 1/3 reduction in SSI.
 Currently under SSI – payments
from a trust for housing from a
family member or a trust cause
a reduction in benefits by
$264.66
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Funeral
The Proposed Regulations also don’t
answer questions regarding funerals:
 Can an ABLE Account be used for
funeral expenses (not pre-paid
which would be a Qualified Expense)
after the death of the beneficiary
prior to pay back?
 That would be helpful since a d4A
and d4C cannot.
Illinois’ ABLE Act
15 ILCS 505/16.6 (P.A. 99-145, eff. 1-1-16)
Sec. 16.6(b):
 The State Treasurer shall not accept contributions for
until the Internal
Revenue Service has issued its final
regulations concerning ABLE accounts.
ABLE accounts under this Section
 The State Treasurer shall establish fees
to be imposed on participants to recover
the costs of administration, recordkeeping, and
investment management. The State Treasurer must use
his or her best efforts to keep these fees as low as
possible, consistent with efficient administration.
ABLE Act 11/20
…to reduce the administrative burden on
program administrators. Below are
excerpts of the relevant sections:
1.
The beneficiary/owner will be
responsible for documenting that ABLE
funds are spent for qualified disability
expenses and the program will not have to
verify how funds are spent.
2.
ABLE programs will not have to
obtain the TIN for each contributor, but
programs must be able to prevent excess
contributions and have the authority to
obtain the TIN for the contributor who puts
the account over the applicable limits.
3.
The beneficiary/owner may selfreport as meeting the disability criteria
under penalty of perjury, and must be able
to produce the necessary certification if
requested.
Illinois’ ABLE Act
15 ILCS 505/16.6 (P.A. 99-145, eff. 1-1-16)
Sec. 16.6(e):
• The State Treasurer may adopt rules to
carry out the purposes of this Section.
• The State Treasurer shall further have the
power to issue peremptory rules
necessary to ensure that ABLE accounts
meet all of the requirements for a
qualified state ABLE program under
Section 529A of the Internal Revenue
Code and any regulations issued by the
Internal Revenue Service.
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An ABLE Account is
Good or Bad?
!
there is a
,
3rd parties
are going to contribute funds to an ABLE
Account, since it becomes 1st party
money, then, in the State of Illinois:
is
establish an ABLE Account;
• In many counties,
to
…
So… many with mental illness
diagnosis, or traumatic
brain injury, if cannot be
documented prior to age 26,
cannot use an ABLE Account!
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ABLE Accounts are
…
A 3rd party special needs trust, if a QDT (Qualified Disability Trust):
1. Has a full
beneficiary could have his/her own,
,&
& The
, there is no tax on a 3rd party SNT that makes no
distributions, until it earns more than 4% (actually more if the
Trust has deductible expenses), and if it spends for the
beneficiary any income in excess of $4,050, up to $10,350,
there still wouldn’t be any income tax.
3. So with proper planning, an ABLE Account with $100,000
(maximum not to lose SSI) would need to earn 14.4 before any
income tax benefit (good luck) over a 3rd party SNT. But there
would be a needless pay back to the state(s), & limitations on
the expenditures.
ABLE Accounts are
For a
…
,
ALL income is
taxed to the beneficiary,
to the Trust.
Again, the beneficiary could have a
&
, &, then at the lowest tax
bracket (10% on next $9,225 in 2016).
.
correctly left to a 3rd
received, not
party SNT.
push the beneficiary’s resources over the
allowable amount.
, in one year can
one account allowed),
to the account (only
, from
Where ABLE Might Fit… continued
 Small amounts of beneficiary’s own
money
 Control for competent beneficiaries
 Accumulation of wages over time
 Transfer of UTMA accounts at 21 (18) to
qualify for SSI and/or Medicaid
 Save for purchase of home or car or
wedding expenses
 65 & can’t use d4A or d4C or no
parent/grandparent/guardian for d4A
Final ABLE thoughts:
 The ABLE Act is a new tool – and in
limited situations can be an easy way
to shelter assets and still remain
qualified for SSI & Medicaid.
 ABLE in most cases is not a substitute
for a special needs trust.
 There is a great need for broad
education about all the different
options for setting aside assets for
persons with disabilities to ensure
quality of life.