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INCORPORATING THE NEW ABLE ACT INTO YOUR ESTATE PLANNING IN HOUSTON

Estate planning is a constantly changing field, in no small part due to continuously evolving legislation. Just this year, the Achieving a Better Life Experience (ABLE) Act was passed, and it has implications that should be discussed with your estate planning lawyer in Houston.


What the ABLE Act Is

This piece of legislation is actually an amendment to section 529 of the IRS code. Section 529 is where we get the name of the “529 Plans” that many Houston estate planning lawyers help clients set up in order to save for a child’s college expenses later. An interesting note about 529 plans is that they are not considered part of your estate when it comes time to pay estate taxes.

ABLE Accounts are like 529 plans, but their purpose is to protect those with disabilities. For this reason, they are of particular interest lawyers who plan for individuals with disabilities. Not all states offer ABLE Accounts at this point, so it is important to check with your estate planning lawyer to determine if it is an option for you or your family member.

As of now, there is an annual limit of $14,000 per year contributed to the account in total. More than one person can contribute to the account for the benefit of the person named, but the total of all these contributions has to be $14,000 or less per year. This means that the account can grow to be fairly large, which has both its benefits and its drawbacks. For example, once it reaches more than $100,000 in value, the account holder will lose most likely lose eligibility for SSI benefits.

Using the Account

Growing the account is certainly an important part of the discussion to have with your estate planning or special needs lawyer in Houston, but it is also good to know just how the funds can be used. According to the Act, the money is for “qualified disability expenses.” At this point, those qualified expenses have not been thoroughly defined, but they will typically be centered around education, training for employment, assistive services and technology, health and wellness, housing, transportation, and a few other categories including a number of legal and financial services.

Drawbacks

The biggest drawback so far is that the account has a payback provision. Any money left in the account will go to reimburse Medicaid (i.e. federal/state government) for any money Medicaid paid after the account was established. Once the rules are set in Texas, we will have more information for clients.

More Questions than Answers?

Because the ABLE Act is so new, it is hard to predict exactly what it is going to look like. Additionally, estate planning and special needs lawyers will have to evaluate each client on an individual basis to determine if this kind of account would be a benefit or a hindrance to reaching other goals. In many cases, you may find that a more “traditional” special needs trust really meets your objectives better

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