Category Archives: Special needs

New ABLE accounts – an option in special needs planning

Mo & downs syndrome childCollege savings plans, often referred to as “529” plans (“NextGen” plans in Maine) have been around for a long time, as a way for parents to set aside funds for a child’s education. These accounts receive favorable tax treatment and have been quite popular with parents and grandparents.

However, this option is generally not useful for parents and grandparents of special needs children, who may never pursue post-secondary education because of their disabilities. These families also worry that a 529 plan will cause the child to lose benefits such as SSI and MaineCare (Medicaid).   Just the same, these disabled children are likely to need funds in the future for things other than college, such as adaptive equipment, transportation, health and wellness activities, and job training.

Soon these families will have the opportunity to set money aside for their disabled children in an account known as an “ABLE” account. “ABLE” stands for “Achieving a Better Life Experience” and is a federal law enacted in 2014.

These are some of the features of an ABLE account:

  • The funds in the ABLE account will grow tax free.
  • Distributions for “qualified expenses” (such as the things referred to above) are not taxed. (Non-qualified expenses, however, are taxed and subject to a 10% penalty.)
  • As much as $14,000 per year can be contributed each year to the beneficiary’s ABLE account.
  • Funds in the ABLE account, up to $100,000, will not affect the beneficiary’s eligibility for SSI or MaineCare (Medicaid).
  • Any funds remaining in the ABLE account when the beneficiary dies must pay back the state of Maine (or other state where the beneficiary lives) for what the state has paid for the beneficiary under the Medicaid program.

Before this savings option becomes available to special needs children and their families, the state must establish its own ABLE account program. This is likely to occur through the Financial Authority of Maine (FAME), which administers the NextGen program.   Hopefully this will happen soon, so that special needs families have the same opportunities to save for a disabled child’s future as they do for non-disabled children.

Special Needs Trusts Can Be Structured Several Ways

By Sally M. Wagley, Maine elder law attorney

A special needs trust can be a valuable tool in protecting the long term well-being of a loved one. Here are some common questions answered about various structures.

What is a “third party” special needs trust?
A third party special needs trust is for the client who wants to provide in his or her will for a disabled child or other relative. The client’s goal is to ensure that the disabled child or relative continues to be eligible for SSI, MaineCare and other public assistance programs while having funds available on the side to meet his or her special needs. The client has a Will which appoints a trustee to handle the disabled child’s or relative’s inheritance. Typically, the trust will say that if anything remains in the trust when the disabled child or relative dies, the balance will then be distributed to certain other family members. (A third party special needs trust is not required to have a “pay-back” provision to reimburse the government.)

What is a “first party” special needs trust?
A first party special needs trust is for the disabled client on public assistance who receives a sum of money; for example, from a personal injury or medical malpractice action, from an inheritance or from a divorce. If the client places the new funds in a “first party” special needs trust which meets certain strict requirements, the client will continue to be eligible for SSI, MaineCare and other public assistance programs. The requirements are: the person must be disabled according to the standards used by the Social Security Administration; the person must be under age 65; the trust must be irrevocable; it must be established by a parent, grandparent, guardian or court; it must state that any funds remaining in the trust at the disabled person’s death be used to pay back the government for what it spent on the person’s medical care. Anyone can be named trustee of a special needs trust of this type: a friend, family member, professional, bank, trust company or non-profit organization.

What is a “pooled” trust?

A pooled trust is a special needs trust administered by a non-profit organization for the benefit of a number of disabled people. The disabled person’s funds are placed in a “sub-account” with the organization. The organization acts as trustee for the disabled person, drawing on the person’s sub-account to make direct payments to providers for the person’s special needs. In Maine, there are two pooled trusts: the Maine Pooled Disability Trust and the Maine Trust for People with Disabilities. Under SSI and MaineCare rules, if a person age 65 or older wants to fund a special needs trust, he or she must use the pooled trust.

Becoming the guardian of a disabled child turning 18

By Sally M. Wagley, Maine elder law attorney

For most children, age 18 is regarded as a significant milestone, another marker on the road to independence. However, when a child has a mental or emotional disability, he or she may continue to be dependent on parents for decisions about living arrangements, health care, social services and finances. Once a child in Maine turns 18, a parent no longer has legal authority to make the child’s decisions. Health care providers may deny the parent access to the child’s medical information, and financial institutions may deny the parent access to the child’s money. In my role as a “special needs” lawyer, I help families in this time of transition.

Some children with disabilities may have the capacity and understanding to delegate authority to a parent under a durable financial power of attorney or health care directive. This is a simple document which can be executed in a lawyer’s office, with a minimum of time and expense. Other children, however, may be so disabled that they are unable to understand and to sign such a document. In this situation, the parent should seek to be appointed as the child’s guardian (and perhaps conservator as well, as discussed below).

Maine’s county probate courts are the courts which handle guardianship matters. These are the steps to obtaining guardianship of an adult disabled child in Maine:

1. Petition for appointment of guardian: The parent files a petition and related forms asking the court to appoint the parent as the child’s guardian and files the papers with the court.

2. Physician’s/psychologist’s report: A professional (such as the child’s physician) fills out a court form stating that the child needs a guardian.

3. Appointment of visitor: The court appoints a visitor to meet with the child and parents and report back to the court as to whether a guardianship is appropriate.

4. Hearing: A hearing is scheduled. Important people in the child’s life receive notice of the hearing. In many of Maine’s 16 probate courts, the hearing is fairly relaxed. The judge may ask a few questions and may make sure that the guardian understands his or her responsibilities. If it is clear to the judge that the appointment of a guardian is in the child’s best interest, the judge will immediately issue an order appointing the parent as the child’s guardian.

5. Conservatorship: If the child has money or other assets in excess of $5000, the parent may also need to seek appointment as the child’s conservator in order to be able to handle the child’s funds. This request should be made to the court at the same time as guardianship is requested.

The Maine probate courts try to make it as simple as possible for parents in this situation to become their child’s guardian. However, to the uninitiated, the process may be daunting. As attorneys with expertise in helping families with disabled children, we can help you either by representing you in the guardianship matter (appearing with you in court), or we can simply assist you with the paperwork, so that you can represent yourself. If you would like our help, please contact us for an appointment, law@leveyandwagley.com.