Caring for a child with a disability creates challenges beyond our lifetime and often takes resources beyond what federal safety net programs can offer in order for our loved one to live the most comfortable and dignified life possible. While rules governing these federal programs place certain income restrictions on disabled persons to qualify, there are sanctioned trusts allowed specifically for special needs planning that allow for first party and third party benefits to supplement federal assistance.
In 2010, Congress passed the Achieving a Better Life Experience (ABLE) Act allowing beneficiaries to have up to $100,000 in a 529 special needs trust and retain Social Security Insurance benefits. Beneficiaries can also retain Medicaid coverage so long as the trust does not exceed the amount for a 529 college savings plan. The ABLE Act allows these trusts to be created so long as the beneficiary’s disability is established prior to the age of 26-years old.
Disabled persons can also create and fund their own first party special needs trusts through a (d)(4)(C). Funds for first party special needs trusts often come from sources such as a personal injury settlement, workers’ compensation award, or an inheritance left directly to the beneficiary. An amount equal to the annual federal gift tax exclusion (currently $15,000) can be deposited annually in the account while still maintaining the beneficiary’s eligibility for Medicaid and Supplemental Security Income