CategorySpecial Needs Planning

Michigan ABLE Accounts Arrive | Michigan Special Needs Planning

Going back almost two years, you may remember me mentioning in this post that Michigan enacted its version of the ABLE Act (Achieving a Better Life Experience Act).  Although Michigan passed its version of the ABLE Act in October of 2015, you could not form a Michigan ABLE account until just recently. This is because there was no established rule for how the accounts would be regulated and what financial institutions would manage them. Well, I have good news.  The wait is now over – Michigan officially has ABLE accounts.

Why does this matter?  Well, for many years, individuals with disabilities (and their caregivers) have faced a difficult decision if they received money in their own name via inheritance, personal injury settlement, or gift – spend it all, pursue a court-created trust or non-profit “pooled” trust, or risk losing vital government assistance.  As with many things, more choices mean a better chance of a choice that fits your situation.

The ABLE account offers a new, additional option for individuals with special needs.  In short, an ABLE account allows certain people with disabilities to have special savings accounts for disability-related expenses without losing eligibility under SSI, Medicaid, and certain other public benefits.  By putting funds in an ABLE account, those funds are not considered a “resource” for the person with the disability (it does not count against him or her).  There are limits on the contributions to the account: no more than $14,000 per year and no more than $100,000 total.  Anything above the maximum amount is considered a “resource”.  The account funds can be used generally for expenses related to the individual’s disability including education, housing, transportation, employment training and support, assistive technology and personal support services, legal fees expenses for oversight and monitoring and funeral and burial expenses.  A Michigan ABLE account has a $45 per year fee, plus the investment expense associated with the individual’s chosen investment option(s).  You can find more information, and open an account, at www.miable.org.

It is important to know that an ABLE account is not the solution in every situation.  Other planning strategies are still valid and may be a better option.  The ABLE account is an additional option.  If you have questions about or need help ensuring the maximum benefit and quality of life for a disabled family member or friend, please contact me.  As a Grand Rapids, MI special needs planning attorney, I am happy to help.

ABLE Accounts and Michigan Special Needs Planning

In the flurry of new laws passed at the end of 2013, there was a law that provides additional options for individuals with special needs or disabilities.  The law is called the ABLE Act – the “Achieving a Better Life Experience” Act. It had overwhelming support from all political parties, something that is rare these days. As you might expect, I am not able to cover all the details one blog post, especially when much of the “nuts and bolts” of how ABLE accounts will work has yet to be figured out through the regulatory process.  So, I will attempt to summarize the act and some important considerations.

10674802805_a9b0103bf6_mThe ABLE Act recognizes that there are additional financial strains faced by individuals with disabilities and their families, including those in the Grand Rapids, Michigan area.  In short, the ABLE Act allows for individuals to utilize a tax-free, state-based private savings account, referred to as an ABLE account, for the care of people with disabilities. This ABLE account can be used to supplement government benefits for “qualified disability expenses” such as medical and dental care, education, employment training, housing, and transportation, while not disqualifying a disabled individual from governmental benefits. As a result of the ABLE Act, eligible individuals and families are now allowed to establish ABLE savings accounts that will not affect their eligibility for Supplemental Security Income, Medicaid and other public benefits.

The ABLE Act states that eligibility will be limited to those individuals with “significant disabilities” with an age of onset of disability before turning 26 years of age. It is important to note that the person does not have to be under 26 years of age, just that the onset of the disability was before turning 26 years of age. Additionally, there are dollar limits on the amount that can be contributed to an ABLE account, both on an annual basis and as a total dollar amount in the account.  The annual contribution limit is $14,000 and the overall amount allowed in the account is $100,000.  To exceed either limit would disqualify the account as an ABLE account, a potentially disastrous result.

Keep in mind, this is not something you can set up immediately. Congress put the general structure in place and it was signed in to law, however regulations must be established before states can begin to set up procedures for managing ABLE accounts. It will likely be late this year before you can set up an ABLE account.

Keep in mind, an ABLE account is not a one size fits all solution for everyone.  An ABLE account is not without its drawbacks.  One of the biggest drawbacks of an ABLE account is that any money remaining in the account upon the passing of the ABLE account holder must be used first to pay back the State for care provided to the account holder.  Many of the planning options that are already available for someone with different abilities continue to provide a better approach for many families.  For example, a special needs trust will likely continue to be the best option for many Grand Rapids, MI area individuals and families.  Why?  For a few main reasons:

  • There is no maximum annual contribution amount
  • There is no maximum allowed amount
  • There is much more flexibility in how the assets are invested
  • You maintain more control over how the assets are used
  • Assets in a special needs trust are not subject to the Medicaid and/or SSI payback to which an ABLE account is subject.

I cannot overemphasize the importance of that last point.  If you, as a family member or friend put money into an ABLE account for someone, that money will be subject to Medicaid and/or SSI claims upon the ABLE account holder’s passing.   Yet, if you established a special needs trust (or contributed to one that was already established), no such “payback” is required and you can specify what happens with the remaining trust assets when the beneficiary passes away.  In short, you have more control.

All that said, an ABLE account is another “tool” in the planning “toolbox” and will help some families and individuals who may otherwise be disqualified from government benefits.

Michigan Special Needs Planning – The Letter of Intent

Law school and the years of research and continuing education that come afterward seem to place all (or most) of the emphasis on the legal aspects of a given situation.  That probably doesn’t come as much of a surprise to you.  But, as a Grand Rapids estate planning lawyer I’ve come to realize that the legal without the practical can leave holes in a family’s planning.  That is why I focus on providing my client families with an estate plan that covers both the legal AND the practical sides of life.

And in my opinion, planning for a family who has one or more children with special needs is one of the areas where this legal/practical combination is the most important.  I truly believe it starts with the special needs planning lawyer’s perspective – it should be a caring one.  You can read some of my thoughts by reading my previous blog posts here and here.  Those posts focus on some of the legal issues that need to be considered when planning for a child with special needs.

The list of practical considerations is even greater when planning for a child with special needs.  A letter of intent is one very important practical item that parents of a special needs child should make sure is part of their estate plan.  My colleague, Rania Combs, recently wrote an excellent post on the topic, which you can read by clicking here.  She provides many excellent suggestions on the topics that should be covered and answers some common questions.

At Lichterman Law, we provide all our client families with a similar draft document as part of our Children Protection Plan.  And for our client families who have children with special needs, we make sure to walk with them through the important legal and practical considerations that will help make sure their child with special needs is cared for by who they want, in the way they want and with all the love and support they deserve.

Call us at 616-827-7596 to find out if your family qualifies for the Lichterman Law Difference.  And if you reference this blog post, we will waive the Peace of Mind Planning Session fee (a $750 value!).

Michael Lichterman is an estate planning and business planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™.  This goes beyond merely planning for finances – it’s about who your are and what’s important to you.  He focuses on estate and asset protection planning for  the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, family owned businesses and pet planning.  He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.

Critical Importance of Estate Planning for a Michigan Special Needs Child

I’ve touched on the subject before in a previous post and in my weekly client e-newsletter.  A presentation given to our Grandville, Michigan Rotary group tugged at my heart and renewed within me the passion to help spread the word about the vital importance of proper estate planning to families with children who have special needs.  Some of the great folks behind Benjamin’s Hope spoke to us about the struggles and joys of having a child with special needs (specifically autism in this case) and the vision they have for a unique location where children can reach their full potential.

I’m not going to pretend that I know what it is like to be a parent of a special needs child.  However, I have clients, friends and colleagues who have children with special needs and it has taught me this – they are children first and foremost.  They light up their parents lives and bring joy to those whose lives they touch.  And yes, there are added stresses and struggles.  The great thing about West Michigan is that there are numerous resources available to parents and their special needs children.  And although they may not qualify for them now, due to the parents’ income or other factors, there are also financial resources available through government programs and private programs.

As parents, we love our children more than anything in the world.  So why wouldn’t we want them to receive every benefit available to them?  Yet many parents put their children at risk of not receiving these benefits because they don’t spend the time or money to put a proper estate plan in place (or they don’t know what options are available).  And what if something happened to the parents? It’s a critical consideration for all parents and even moreso for the parents of a special needs child.  Who would care for your child?  Do they know how to care for a child with special needs?  Would a care manager be important?  Have you provided for one and given direction on how he or she should be involved?  Have you provided financial resources through life insurance or investments so your child can enjoy the life you want them to have?  Have you made sure to protect whatever benefits they may be entitled to as they get older or are they at risk because of the planning you’ve done (or lack of planning)?

As an attorney who focuses in estate planning, I make it a point to keep up on the unique planning opportunities available to parents with special needs children.  Please, please, please make sure to put a comprehensive plan in place.  There’s no doubt you care very deeply about your child(ren) – show it by planning for their future.  And make sure whatever attorney you work with has specific training, knowledge and experience planning for children with special needs.  We can help if you call (616) 827-7596 – mention this blog post and we will waive the fee for your Peace of Mind Planning Session ($550 value)!

Michael Lichterman is an estate planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™.  This goes beyond merely planning for finances – it’s about who your are and what’s important to you.  He focuses on planning for  the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, and family owned business succession – and he is privileged to do so from a Christian perspective.  He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.

Planning for Special Needs Children in Michigan

I love working with families and helping them ensure their children’s future, there’s no question about that.  Although there are special considerations for each family when it comes to planning, there are some additional considerations for families with a child who has special needs.  This post was originally one of my weekly fun and informative e-newsletters.  I received such great feedback that I thought I would share it with everyone .  Feel free to forward this along to families who come to mind, and let them know that we will certainly assist them with their unique situation.  And you can sign-up to receive my weekly e-newsletter by clicking here.  As a bonus, you will receive my free report “10 Things You May Not Know About Cheap Online Will Software.”  Enjoy . . . and share your thoughts via comment below or clicking here!

Every child is special, in their own unique way. That said, certain children are even more precious–and their needs are great. I’m referring to what many call “special needs children” (though, it’s perhaps better to call them children with special needs–after all, they really are “children” FIRST, and not to be defined first by their “needs”!).

Because this is something which adds certain complications to any family, I thought I’d take a moment this week to address 3 key wealth strategies for families with these beautiful, special children.

Planning Your Family’s Wealth Around a Child With Special Needs
Here is the standard thinking, in regards to setting up your affairs with children who have special needs:
Families realize that they have to support these children for the rest of their lives. So, they typically write wills and take out significant term life insurance policies. They are careful to name a trust as the beneficiary, because if their child has more than a minimal amount of assets upon reaching age 18, he/she will no longer be eligible for some government benefits.

However, while these families are indeed on the right track, parents with special needs children also should:

1. Set up a second trust. I am a strong supporter of stand-alone special needs trusts.  The purpose of this additional trust would be to make sure that the provisions in the parents’ trust don’t disqualify the child from receiving any government benefits that would otherwise be available for his/her care.  It’s better to “wall off” what the child receives.  The separate trust is also there so that friends and family members can contribute to the child’s care while the family is still alive–without causing the child to lose eligibility for federal disability benefits.

2. Increase savings. These families need a much larger emergency fund than most, and they also need to create a “reserve fund”. They should concentrate on savings–rather than paying off debt–especially if interest rates on loans are low.

3. Plan for three retirements. These families not only have to plan for their retirements, but also for the child’s long-term care. They should maximize their savings and take an aggressive approach with their portfolio to maximize returns over the long run.

While I’m not a financial planner, I thought that these tips were so important that if you find yourself in this situation, you should raise them with your professional adviser.

Michael Lichterman is an estate planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™.  This goes beyond merely planning for finances – it’s about who your are and what’s important to you.  He focuses on planning for  the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, and family owned business succession – and he is privileged to do so from a Christian perspective.  He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.