Rubin Law on “ABLE Act” Achieving a Better Life Experience Act signed by President Obama on 12/19/14, BUT, now, legislation is required in each State!

Illinois ABLE “Bill(s)”: Three competing ABLE Bills, all pending in Illinois House… with some different provisions… HB3117, HB3360, HB2475 & HB3370, all four up in Committee. The Senate ABLE Bill, SB1383. So… still pending in Springfield… So… NO ABLE ACCOUNTS in Illinois yet.

you HEARD IT IS “JUST LIKE” A 529 ACCOUNT FOR EDUCATION, & REPLACES THE NEED FOR both 3rd party & 1st party SPECIAL NEEDS’ TRUSTS & any other special needs planning. WHAT’S THE TRUTH?

Among the many issues with ABLE (H 3423 & S 1872) are: (1) ABLE is much more limited on how you can spend the money than a traditional 1st party or 3rd party special needs trust (example, no vacations under ABLE); (2) reporting requirements to the federal government unlike a 3rd party special needs trust, and if no guardianship and not a minor, much more reporting requirements than a 1st party special needs trust; (3) a pay back (reimbursement) to the State when the beneficiary dies, for all that the State(s) paid, unlike a 3rd party special needs trust where the remainder stays with the family; (4) if there is a guardianship, then court approval is required to establish the ABLE Account in Illinois, and in many counties (all collar counties), court approval for expenditures and required notice to the State of all expenditures, subject to State challenge, and possibly have to post a surety bond; (5) If ABLE Accounts for beneficiary, in total, exceed $100,000, then the beneficiary will lose SSI, and in the way it is currently worded, in some states, such as Illinois, where Medicaid is not automatically tied to SSI (in most states it is, but NOT Illinois), loss of Medicaid, including Waiver programs; (6) you can’t move custodial accounts (UTMAs) to an ABLE Account if there is a Guardianship or the beneficiary is a minor, without court approval. I could go on, but these are just some of the issues. When does it make sense? For small litigation settlements and/or when the beneficiary is putting their own money in and no one cares that the other children or the beneficiary’s children will not see anything, get anything when the beneficiary dies. It also would be beneficial if the beneficiary is on SSDI and Medicare and not on SSI or Medicaid. The real benefit is income tax free growth, but investing in federal income tax free municipal bonds or municipal bond funds, or equities producing little income where you only will be subject to capital gain rates, maybe a better option. Also remember that Pooled Trusts, like Life’s Plan and the Illinois Disability Association are also alternatives that should be considered without the problems outlined above. 1st… An ABLE Account is controlled by the individual with special needs, IF they are they are 18 & their OWN Guardian!

Among the many issues with ABLE (H 3423 & S 1872) are: (1) ABLE is much more limited on how you can spend the money than a traditional 1st party or 3rd party special needs trust (example, no vacations under ABLE); (2) reporting requirements to the federal government unlike a 3rd party special needs trust, and if no guardianship and not a minor, much more reporting requirements than a 1st party special needs trust; (3) a pay back (reimbursement) to the State when the beneficiary dies, for all that the State(s) paid, unlike a 3rd party special needs trust where the remainder stays with the family; (4) if there is a guardianship, then court approval is required to establish the ABLE Account in Illinois, and in many counties (all collar counties), court approval for expenditures and required notice to the State of all expenditures, subject to State challenge, and possibly have to post a surety bond; (5) If ABLE Accounts for beneficiary, in total, exceed $100,000, then the beneficiary will lose SSI, and in the way it is currently worded, in some states, such as Illinois, where Medicaid is not automatically tied to SSI (in most states it is, but NOT Illinois), loss of Medicaid, including Waiver programs; (6) you can’t move custodial accounts (UTMAs) to an ABLE Account if there is a Guardianship or the beneficiary is a minor, without court approval. I could go on, but these are just some of the issues. When does it make sense? For small litigation settlements and/or when the beneficiary is putting their own money in and no one cares that the other children or the beneficiary’s children will not see anything, get anything when the beneficiary dies. It also would be beneficial if the beneficiary is on SSDI and Medicare and not on SSI or Medicaid. The real benefit is income tax free growth, but investing in federal income tax free municipal bonds or municipal bond funds, or equities producing little income where you only will be subject to capital gain rates, maybe a better option. Also remember that Pooled Trusts, like Life’s Plan and the Illinois Disability Association are also alternatives that should be considered without the problems outlined above. 1st… continued… If a minor, the federal law is unclear & federal regulations are not expected until next summer!

Among the many issues with ABLE (H 3423 & S 1872) are: (1) ABLE is much more limited on how you can spend the money than a traditional 1st party or 3rd party special needs trust (example, no vacations under ABLE); (2) reporting requirements to the federal government unlike a 3rd party special needs trust, and if no guardianship and not a minor, much more reporting requirements than a 1st party special needs trust; (3) a pay back (reimbursement) to the State when the beneficiary dies, for all that the State(s) paid, unlike a 3rd party special needs trust where the remainder stays with the family; (4) if there is a guardianship, then court approval is required to establish the ABLE Account in Illinois, and in many counties (all collar counties), court approval for expenditures and required notice to the State of all expenditures, subject to State challenge, and possibly have to post a surety bond; (5) If ABLE Accounts for beneficiary, in total, exceed $100,000, then the beneficiary will lose SSI, and in the way it is currently worded, in some states, such as Illinois, where Medicaid is not automatically tied to SSI (in most states it is, but NOT Illinois), loss of Medicaid, including Waiver programs; (6) you can’t move custodial accounts (UTMAs) to an ABLE Account if there is a Guardianship or the beneficiary is a minor, without court approval. I could go on, but these are just some of the issues. When does it make sense? For small litigation settlements and/or when the beneficiary is putting their own money in and no one cares that the other children or the beneficiary’s children will not see anything, get anything when the beneficiary dies. It also would be beneficial if the beneficiary is on SSDI and Medicare and not on SSI or Medicaid. The real benefit is income tax free growth, but investing in federal income tax free municipal bonds or municipal bond funds, or equities producing little income where you only will be subject to capital gain rates, maybe a better option. Also remember that Pooled Trusts, like Life’s Plan and the Illinois Disability Association are also alternatives that should be considered without the problems outlined above. 1st… continued… and if the individual has a Guardian, depending on the County, may have Court supervision, State involvement, & a surety bond!

Among the many issues with ABLE (H 3423 & S 1872) are: (1) ABLE is much more limited on how you can spend the money than a traditional 1st party or 3rd party special needs trust (example, no vacations under ABLE); (2) reporting requirements to the federal government unlike a 3rd party special needs trust, and if no guardianship and not a minor, much more reporting requirements than a 1st party special needs trust; (3) a pay back (reimbursement) to the State when the beneficiary dies, for all that the State(s) paid, unlike a 3rd party special needs trust where the remainder stays with the family; (4) if there is a guardianship, then court approval is required to establish the ABLE Account in Illinois, and in many counties (all collar counties), court approval for expenditures and required notice to the State of all expenditures, subject to State challenge, and possibly have to post a surety bond; (5) If ABLE Accounts for beneficiary, in total, exceed $100,000, then the beneficiary will lose SSI, and in the way it is currently worded, in some states, such as Illinois, where Medicaid is not automatically tied to SSI (in most states it is, but NOT Illinois), loss of Medicaid, including Waiver programs; (6) you can’t move custodial accounts (UTMAs) to an ABLE Account if there is a Guardianship or the beneficiary is a minor, without court approval. I could go on, but these are just some of the issues. When does it make sense? For small litigation settlements and/or when the beneficiary is putting their own money in and no one cares that the other children or the beneficiary’s children will not see anything, get anything when the beneficiary dies. It also would be beneficial if the beneficiary is on SSDI and Medicare and not on SSI or Medicaid. The real benefit is income tax free growth, but investing in federal income tax free municipal bonds or municipal bond funds, or equities producing little income where you only will be subject to capital gain rates, maybe a better option. Also remember that Pooled Trusts, like Life’s Plan and the Illinois Disability Association are also alternatives that should be considered without the problems outlined above. 2nd… An ABLE Account is limited on how you can spend the money in the account, far more limited than a Special Needs Trust!

Among the many issues with ABLE (H 3423 & S 1872) are: (1) ABLE is much more limited on how you can spend the money than a traditional 1st party or 3rd party special needs trust (example, no vacations under ABLE); (2) reporting requirements to the federal government unlike a 3rd party special needs trust, and if no guardianship and not a minor, much more reporting requirements than a 1st party special needs trust; (3) a pay back (reimbursement) to the State when the beneficiary dies, for all that the State(s) paid, unlike a 3rd party special needs trust where the remainder stays with the family; (4) if there is a guardianship, then court approval is required to establish the ABLE Account in Illinois, and in many counties (all collar counties), court approval for expenditures and required notice to the State of all expenditures, subject to State challenge, and possibly have to post a surety bond; (5) If ABLE Accounts for beneficiary, in total, exceed $100,000, then the beneficiary will lose SSI, and in the way it is currently worded, in some states, such as Illinois, where Medicaid is not automatically tied to SSI (in most states it is, but NOT Illinois), loss of Medicaid, including Waiver programs; (6) you can’t move custodial accounts (UTMAs) to an ABLE Account if there is a Guardianship or the beneficiary is a minor, without court approval. I could go on, but these are just some of the issues. When does it make sense? For small litigation settlements and/or when the beneficiary is putting their own money in and no one cares that the other children or the beneficiary’s children will not see anything, get anything when the beneficiary dies. It also would be beneficial if the beneficiary is on SSDI and Medicare and not on SSI or Medicaid. The real benefit is income tax free growth, but investing in federal income tax free municipal bonds or municipal bond funds, or equities producing little income where you only will be subject to capital gain rates, maybe a better option. Also remember that Pooled Trusts, like Life’s Plan and the Illinois Disability Association are also alternatives that should be considered without the problems outlined above. 3rd… ABLE Act LIMITS on how much can be contributed annually (ONLY $14,000 from ALL SOURCES) to the ONE allowed ABLE Account, unlike Special Needs Trusts which have no limits on contributions & can have multiple Trusts & Accounts.

4th… REQUIRES a PAY BACK (reimbursement) to the State(s) when the beneficiary dies, for ALL that the State(s) paid, including for 3rd party contributions (i.e. parents, grandparents, siblings, etc.), after the account was created, UNLIKE a 3RD PARTY SNT which has NO PAY BACK!

Among the many issues with ABLE (H 3423 & S 1872) are: (1) ABLE is much more limited on how you can spend the money than a traditional 1st party or 3rd party special needs trust (example, no vacations under ABLE); (2) reporting requirements to the federal government unlike a 3rd party special needs trust, and if no guardianship and not a minor, much more reporting requirements than a 1st party special needs trust; (3) a pay back (reimbursement) to the State when the beneficiary dies, for all that the State(s) paid, unlike a 3rd party special needs trust where the remainder stays with the family; (4) if there is a guardianship, then court approval is required to establish the ABLE Account in Illinois, and in many counties (all collar counties), court approval for expenditures and required notice to the State of all expenditures, subject to State challenge, and possibly have to post a surety bond; (5) If ABLE Accounts for beneficiary, in total, exceed $100,000, then the beneficiary will lose SSI, and in the way it is currently worded, in some states, such as Illinois, where Medicaid is not automatically tied to SSI (in most states it is, but NOT Illinois), loss of Medicaid, including Waiver programs; (6) you can’t move custodial accounts (UTMAs) to an ABLE Account if there is a Guardianship or the beneficiary is a minor, without court approval. I could go on, but these are just some of the issues. When does it make sense? For small litigation settlements and/or when the beneficiary is putting their own money in and no one cares that the other children or the beneficiary’s children will not see anything, get anything when the beneficiary dies. It also would be beneficial if the beneficiary is on SSDI and Medicare and not on SSI or Medicaid. The real benefit is income tax free growth, but investing in federal income tax free municipal bonds or municipal bond funds, or equities producing little income where you only will be subject to capital gain rates, maybe a better option. Also remember that Pooled Trusts, like Life’s Plan and the Illinois Disability Association are also alternatives that should be considered without the problems outlined above. 5th… If the amount in the ABLE Account (again, can only have one account) for a beneficiary, exceeds $100,000, then the beneficiary will LOSE their SSI. Not the case with either a 3rd party or 1st party SNT!

Among the many issues with ABLE (H 3423 & S 1872) are: (1) ABLE is much more limited on how you can spend the money than a traditional 1st party or 3rd party special needs trust (example, no vacations under ABLE); (2) reporting requirements to the federal government unlike a 3rd party special needs trust, and if no guardianship and not a minor, much more reporting requirements than a 1st party special needs trust; (3) a pay back (reimbursement) to the State when the beneficiary dies, for all that the State(s) paid, unlike a 3rd party special needs trust where the remainder stays with the family; (4) if there is a guardianship, then court approval is required to establish the ABLE Account in Illinois, and in many counties (all collar counties), court approval for expenditures and required notice to the State of all expenditures, subject to State challenge, and possibly have to post a surety bond; (5) If ABLE Accounts for beneficiary, in total, exceed $100,000, then the beneficiary will lose SSI, and in the way it is currently worded, in some states, such as Illinois, where Medicaid is not automatically tied to SSI (in most states it is, but NOT Illinois), loss of Medicaid, including Waiver programs; (6) you can’t move custodial accounts (UTMAs) to an ABLE Account if there is a Guardianship or the beneficiary is a minor, without court approval. I could go on, but these are just some of the issues. When does it make sense? For small litigation settlements and/or when the beneficiary is putting their own money in and no one cares that the other children or the beneficiary’s children will not see anything, get anything when the beneficiary dies. It also would be beneficial if the beneficiary is on SSDI and Medicare and not on SSI or Medicaid. The real benefit is income tax free growth, but investing in federal income tax free municipal bonds or municipal bond funds, or equities producing little income where you only will be subject to capital gain rates, maybe a better option. Also remember that Pooled Trusts, like Life’s Plan and the Illinois Disability Association are also alternatives that should be considered without the problems outlined above. 6th… AGAIN, IF there is a GUARDIANSHIP, & 3rd parties are going to contribute funds to an ABLE Account, then, in the State of Illinois: COURT APPROVAL is REQUIRED to establish an ABLE Account; In many counties, COURT APPROVAL of ABLE expenditures will be required; Required notice to, & approval of the State of Illinois, of all expenditures; Required annual surety bond (premium). NONE OF WHICH IS THE CASE FOR A 3RD PARTY SPECIAL NEEDS TRUST!

7th… ABLE Accounts are TAX FREE… Among the many issues with ABLE (H 3423 & S 1872) are: (1) ABLE is much more limited on how you can spend the money than a traditional 1st party or 3rd party special needs trust (example, no vacations under ABLE); (2) reporting requirements to the federal government unlike a 3rd party special needs trust, and if no guardianship and not a minor, much more reporting requirements than a 1st party special needs trust; (3) a pay back (reimbursement) to the State when the beneficiary dies, for all that the State(s) paid, unlike a 3rd party special needs trust where the remainder stays with the family; (4) if there is a guardianship, then court approval is required to establish the ABLE Account in Illinois, and in many counties (all collar counties), court approval for expenditures and required notice to the State of all expenditures, subject to State challenge, and possibly have to post a surety bond; (5) If ABLE Accounts for beneficiary, in total, exceed $100,000, then the beneficiary will lose SSI, and in the way it is currently worded, in some states, such as Illinois, where Medicaid is not automatically tied to SSI (in most states it is, but NOT Illinois), loss of Medicaid, including Waiver programs; (6) you can’t move custodial accounts (UTMAs) to an ABLE Account if there is a Guardianship or the beneficiary is a minor, without court approval. I could go on, but these are just some of the issues. When does it make sense? For small litigation settlements and/or when the beneficiary is putting their own money in and no one cares that the other children or the beneficiary’s children will not see anything, get anything when the beneficiary dies. It also would be beneficial if the beneficiary is on SSDI and Medicare and not on SSI or Medicaid. The real benefit is income tax free growth, but investing in federal income tax free municipal bonds or municipal bond funds, or equities producing little income where you only will be subject to capital gain rates, maybe a better option. Also remember that Pooled Trusts, like Life’s Plan and the Illinois Disability Association are also alternatives that should be considered without the problems outlined above. 7th… ABLE Accounts are TAX FREE… A 3rd party special needs trust, if a QDT (Qualified Disability Trust) : Has a full $4,000 exemption in 2015, & all distributions from the Trust for the benefit of the beneficiary carry out the income to the beneficiary’s 1040 (not taxed at Trust Level) & The beneficiary could have his/her own, exemption, of $4,000, & a standard deduction of $6,300 in 2015, not much of a tax benefit for using an ABLE Account… Therefore, with the 3rd party special needs trust you may be able to shelter from income tax in 2015 $14,300. An ABLE Account with $100,000 (maximum not to lose SSI) would need to earn over 14% for 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. SO WHAT!

Among the many issues with ABLE (H 3423 & S 1872) are: (1) ABLE is much more limited on how you can spend the money than a traditional 1st party or 3rd party special needs trust (example, no vacations under ABLE); (2) reporting requirements to the federal government unlike a 3rd party special needs trust, and if no guardianship and not a minor, much more reporting requirements than a 1st party special needs trust; (3) a pay back (reimbursement) to the State when the beneficiary dies, for all that the State(s) paid, unlike a 3rd party special needs trust where the remainder stays with the family; (4) if there is a guardianship, then court approval is required to establish the ABLE Account in Illinois, and in many counties (all collar counties), court approval for expenditures and required notice to the State of all expenditures, subject to State challenge, and possibly have to post a surety bond; (5) If ABLE Accounts for beneficiary, in total, exceed $100,000, then the beneficiary will lose SSI, and in the way it is currently worded, in some states, such as Illinois, where Medicaid is not automatically tied to SSI (in most states it is, but NOT Illinois), loss of Medicaid, including Waiver programs; (6) you can’t move custodial accounts (UTMAs) to an ABLE Account if there is a Guardianship or the beneficiary is a minor, without court approval. I could go on, but these are just some of the issues. When does it make sense? For small litigation settlements and/or when the beneficiary is putting their own money in and no one cares that the other children or the beneficiary’s children will not see anything, get anything when the beneficiary dies. It also would be beneficial if the beneficiary is on SSDI and Medicare and not on SSI or Medicaid. The real benefit is income tax free growth, but investing in federal income tax free municipal bonds or municipal bond funds, or equities producing little income where you only will be subject to capital gain rates, maybe a better option. Also remember that Pooled Trusts, like Life’s Plan and the Illinois Disability Association are also alternatives that should be considered without the problems outlined above. 8th… For a 1st party “pay back” trust, ALL income is taxed to the beneficiary, NOT to the Trust. Again, the beneficiary could have a $4,000 exemption & $6,300 standard deduction. THEREFORE, NO TAX UNTIL THE TRUST INCOME EXCEEDS $10,300, &, then at the lowest tax bracket (10% on next $9,225). So, again, $100,000 in ABLE Accounts is not producing any income tax benefit, & has more limited uses of the funds in the accounts than a 1st party special needs trust! SO WHAT! ABLE Accounts are TAX FREE…

9th… In Illinois the maximum that can be in an ABLE Account for a beneficiary is $350,000 (the same as for college 529 plans) or will lose Medicaid. NO SUCH LIMIT for Special Needs Trusts!

10th… Can’t use if disability onset is age 26 or older… So… many with mental illness diagnosis, or traumatic brain injury, if cannot be documented prior to age 26, cannot use an ABLE Account!

Remember: If the individual has no Guardian, the individual is in charge of their own money. Does he/she need protection from himself/herself or others? If yes, ABLE is not the answer.

& ALSO CONSIDER ILLINOIS’ HBWD AS A BETTER ALTERNATIVE IN SOME SITUATIONS… Consider that in Illinois we have HBWD: So if the beneficiary is working (FICA being withheld), is on SSDI, not on SSI, & only Medicaid is the issue, then under HBWD the beneficiary can have up to $25,000 in assets, & unlimited qualified plan benefits... Not limited to ABLE’s $14,000 a year… & expenditures are not limited! ABLE is definitely another “tool” to consider, but only makes sense in very few situations.

&… CONSIDER THAT ILLINOIS’ HAS ACA “EXPANDED MEDICAID”… Consider that in Illinois we have ACA EXPANDED MEDICAID: So if: the beneficiary is under 65 & not on Medicare & is not on concerned about losing SSI… that is, only Medicaid is the issue, then under Illinois ACA Expanded Medicaid can have unlimited assets, keep Medicaid for medical & all Medicaid Waiver services/programs, & if invest in tax free bonds, still pay no Federal income tax!

When to consider ABLE? IF NO Guardianship, & can take care of their own money, then: Under $14,000 inheritance received, not correctly left to a 3rd party SNT. Under $14,000 “Litigation Settlement” Beneficiary has unspent SSI/SSDI/earnings that will push the beneficiary’s resources over the allowable amount. BUT, in one year can ONLY ADD to the account (only one account allowed), IN TOTAL, from ALL CONTRIBUTORS, $14,000!