Stephen Brooks describes himself as an attorney who is passionate about people, which is why he feels so strongly about new legislation that could help many disabled live their lives without impoverishment.
The ABLE Act, short for Achieving a Better Life Experience, provides the ability to more easily create tax-free savings accounts for individuals with disabilities without compromising their benefits. It was signed into law by President Barack Obama in December. Now the law requires states to create their own regulations before accounts can be officially set up.
Brooks said this will be a major asset for the families of disabled children and young adults looking to supplement benefits already provided. The ABLE account allows for up to $100,000 to be put away for a disabled person receiving government benefits such as Supplemental Security Income and Medicaid. Only when the account exceeds $100,000 would the amount of assistance the person receives be affected.
Before that, there would be penalties levied to those receiving benefits with more than $2,000 in an account for an unmarried disabled person and $3,000 for a disabled married person, according to Brooks.
This type of law allows parents or caregivers to put money into an account that a disabled person has access to for long-term needs or for a range of qualified expenses, he said. Those expenses include education, employment training, transportation, assistive technology, clothing, housing and food, as well as medical and health assistance.
It may be especially important for those who can only collect SSI, a low-income program for those who are unable to work and whose parents are not retired, disabled or deceased, he added.
“Really, what SSI is telling you is that if you don’t have a work history and one of your parents (isn’t) disabled, then we’re going to make you live impoverished even though you never had the opportunity to work,” said Brooks, a trust and estate planner at the West Seneca law offices of Bernhardi & Lukasik. “This act stops that. ... As long as the account is under $100,000, the person can still get benefits and live a pretty decent life.”
Richard Marchese of Woods Oviatt Gilman will be a speaker at ABLE Act seminars in Buffalo and Rochester in June. He said a good portion of his practice involves working with families of special-needs children, so this has been on his clients’ radar for quite some time. The account is an option for families looking to set aside money for a loved one with a disability, but there are a few caveats, he said.
“Some people have modest sums of money and they want to do something for their disabled family member,” said Marchese, a partner in the firm’s Rochester office. “It’s not hundreds of thousands of dollars; it may be a thousand or two to set aside. The account will be attractive to these people because they’re going to be able to do that and the disabled person will be able to utilize that money in the account for a broad range of expenses.”
Kevin Horrigan, associate vice president of public affairs at People Inc., Western New York’s largest provider of services to the disabled, said the ABLE Act is the most significant piece of legislation for individuals with disabilities since the Americans with Disabilities Act of 1990.
“Parents and caregivers of children with disabilities face tremendous financial challenges when it comes to caring for their loved ones,” he told Buffalo Business First. “To save up to $100,000 tax-free, without losing benefits, is enormous.”
The account also provides another option to a supplemental needs trust, which can be set up for individuals with disabilities to pay for special needs that the government does not provide. However, the money in that trust isn’t deemed to be available for use for health care, Marchese said.
“These trusts entail utilizing an attorney, having a trustee and sometimes just the word, trust, scares people,” he said. “They say, ‘Why do I need a trust?’ People were looking for an alternative and the ABLE Act provides that. ... The way a lot of practitioners are looking at this is that it provides an alternative, or something that can be used in conjunction with a special-needs trust.”
It will be funded and run by the state — similar in setup to tax-free 529 college savings accounts — and allow families to save for expenses on behalf of qualified beneficiaries with disabilities. Contributions to the account are not tax-deductible, but the growth in the account is tax-free, according to Marchese.
Brooks said he and Bernhardi & Lukasik founding partner William Bernhardi have been following the path of this legislation for years. A disabled young person’s family helped pound it through the system, he said. The family was of middle-class status but because of SSI’s constraints, the person was forced to live impoverished or not receive benefits at all, he said.
“What do you do when you’re middle class and you have a disabled child? You can’t support them forever,” Brooks said. “At least you should be able to get some help if you choose to. This way, you can get government benefits that the child deserves and it doesn’t hinder the parents or anybody else from helping them out.”
The firm has a number of clients who will feel the impact of the ABLE Act, he added, one of whom has a wheelchair-bound student attending the Rochester Institute of Technology. The person gets benefits at the first of the month and has been dealing with a massive overpayment for going above the $2,000 threshold.
Brooks said he has already spoken with more than 10 clients and advised parents to start putting money in these accounts as soon as possible. He also plans to send out a mass mailing to families with children on SSI.
Paul Cesana is the recently retired CEO of The Resource Center in Jamestown, which serves thousands of individuals with disabilities. He said the law gives families another tool to plan for the future of their loved ones, but he cautioned that with more than 30 percent of affected families living in poverty, many will continue to struggle.
“These individuals and their families struggle with day-to-day expenses and don’t have extra money to set aside,” Cesana told Business First earlier this year. “So while the ABLE Act is great for people with sound financial resources, a significant number of individuals with disabilities are not in a position to realize any benefits from this legislation.”
There are other limitations, Marchese said. They include that the disability must have occurred before age 26, which doesn’t apply to people injured or afflicted with psychiatric or psychological problems later than that; the contribution limit cannot exceed $14,000 in any given year, as of 2015; and any money remaining in the account when the beneficiary passes away must be first utilized to pay back Medicaid.
Marchese said supplemental needs trusts can be useful when a person wants to leave a disabled family member a larger sum of money. In this case, when the person who the trust was set up for dies, his or her heirs would collect the balance without having to pay back any benefits program.
Brooks said he’s not sure how much financial benefit attorneys would personally see by setting up these accounts. He hopes trust and estate planning and disability attorneys will be able to see through their own fee to recommend them and not just lean toward supplemental needs trusts.
“It’s real important legislation, but it’s going to be like any other law. It will only be important if people take advantage of it,” Brooks said. “The families’ attorneys are going to have to let them know about it.”