Author: Michael

The Boilerplate Debate

November 25, 2017 /

I’ve heard it a lot over the years when meeting with client families: “I did not read the boilerplate”; or “that’s not important, it’s just boilerplate”.  The general feeling tends to be that boilerplate is a pain and really does not accomplish anything.  The truth may surprise you.

What really is “boilerplate”?  The definition is “standardized pieces of text for use as clauses in contracts or as part of a computer program”.   Contrary to what many may believe, the “boilerplate” can make or break your estate plan.  You see, it is impossible to predict what will happen in your life, your family and with the laws that affect your estate plan.  At least in documents I draft, the boilerplate is there to cover all the situations I can think of that may come up.  I do not draft it thinking it will happen; I draft it knowing that I want your plan to work how you want even IF it does happen.

We had a case recently where the boilerplate was critical to carrying out my client’s wishes after passing.  A disgruntled beneficiary brought a suit to have my client’s trust declared invalid.  We won.  Then, we petitioned the court to have her removed as a beneficiary.  How could we do that?  Because the “boilerplate” of the document stated that if a beneficiary challenged the validity of the document, they would no longer be considered a beneficiary of the trust.  It was very important to my client that his wishes be carried out.  He had several friends, family and charities he wanted to benefit from his hard work and he did not want a beneficiary’s lawsuit to upend that plan or lessen the amount his chosen beneficiaries would receive.  The “boilerplate” included a “no contest clause”, which was the key to minimizing the impact of the lawsuit on the other beneficiaries.

So, next time you review your estate plan documents, take some extra time to read through the “boilerplate”.  And if you have any questions about why a particular provision is there, just ask me.  I expect there is a good reason it’s there.

Qualifying for Medicaid | Grand Rapids, Mi Elder Law Attorney

September 17, 2017 /

In my last post, I gave a brief overview of what Medicaid is, and what it is not.   The natural follow-up to that is a discussion of Medicaid qualification.  As a Grand Rapids, MI elder law attorney, it is important to point out that this is a VERY general overview. The policy manual for Medicaid is hundreds of pages and the continuing education materials go beyond that. I am just touching the very tip of the iceberg in this post. The policies that govern medicaid are constantly changing. This information is not meant to be used to attempt to qualify, or do pre-planning to qualify, for Medicaid coverage.

Attorney disclaimer out of the way, what does it take to qualify for Medicaid. Generally speaking, an unmarried person is able to have no more than $2,000 in countable assets and less monthly income than is needed to cover the monthly private pay rate at the nursing home. These numbers apply to “countable” assets – a term I talked through briefly in my last post. A married couple is generally allowed to keep a maximum of $120,900 (2017) in countable assets for the benefit of the “community” spouse (the spouse not in the nursing home). This amount is adjusted each year for inflation. In both cases, there is a penalty applied if the applicant or the applicant’s spouse transferred any assets for less than market value within the 60-month period preceding the Medicaid application. That is a key thing to remember. I really can’t remember the last time I met with an individual or couple for Medicaid qualification and they had not given their kids, grandkids or someone else who they cared about some amount of money or an asset (e.g., car, etc.) within 60 months of applying for Medicaid. That can lead to a penalty. Which leads nicely into the topic of Medicaid planning.

My personal definition of Medicaid planning is analyzing the assets and income a person (or couple) has, historical transactions, and developing a plan to structure the ownership and type of their assets and income to either (1) make Medicaid an option, or (2) make Medicaid an option sooner than it would have been without the planning. For many married couples this involves additional (or a complete overhaul of) estate planning documents, planning for how countable assets can/will be converted into non-countable assets when qualification is needed, and properly documenting any divestments and developing ways to cover any penalties that result.

After someone is approved for Medicaid they will usually have a “patient pay amount”. This is the amount of the applicant’s income that he/she must pay to the facility – Medicaid covers the rest. With a married couple, there will also be a “protected spousal amount” and “community spouse income allowance”. The protected spousal amount is the amount that the community spouse is allowed to keep of his/her assets and the applicant spouse’s assets. The community spouse income allowance is the amount of the applicant spouse’s income that the community spouse can transfer to herself/himself on a monthly basis to help supplement his/her income.

On an annual basis, you will need to complete a redetermination application and submit it before each anniversary of the Medicaid approval. This is just like the initial application, but covers only the time frame from the application (or the prior redetermination), and for a couple it applies to only the applicant spouse’s assets and income (after the first redetermination). Upon approval the community spouse and the applicant spouse become separate in the eyes of Medicaid from an asset and income standpoint, even though they were viewed as one for the initial application.

Again, this is a very basic, general overview. I probably covered about 10% of what I deal with in a typical Medicaid qualification or pre-plan. If you have any questions, let me know.

What is Medicaid and Why Does it Matter? | Grand Rapids, Mi Elder Law Attorney

September 5, 2017 /

That question really says it all. A big question to many families, and one I hear a lot as a Grand Rapids, Mi elder law attorney – what is Medicaid? Medicaid is a big umbrella, generally designed to make sure that essential healthcare services are available to people without the financial resources to get them. It is NOT Medicare, although many people confuse it with Medicare. Medicare is a government program providing certain healthcare coverage to all people over 65 years old (as well as certain younger people with disabilities). For purposes of this post, I will focus on what many refer to as skilled nursing Medicaid. This encompasses three main programs: Medicaid assistance to persons in Medicaid-certified nursing homes, MI Choice Waiver Program (Waiver), and the Program of All Inclusive Care for the Elderly (PACE). The last two provide Medicaid assistance to people who need long-term care services and meet the nursing home level-of-care requirement, but who elect to receive that care in the community (e.g., not in a nursing home).

The main confusion to many is between Medicare and Medicaid. They are different, as you can see from the explanation above. The next misconception out there is that you have to put yourself into poverty to qualify – that you have to spend everything you have until almost nothing is left. It is very true that there are income and asset limits on qualifying for Medicaid. For 2017, the asset limit for a single individual is $2,000 in countable assets, and for a couple is $120,900 in countable assets. The numbers vary on the income side, depending on the program for which you are trying to qualify. The key thing to remember on asset limits is that the number is based on “countable” assets. Not all assets are “countable”. This is a key part of Medicaid planning.

So what is a countable asset? Quite simply, it is an asset that the Department of Health and Human Services (DHHS) will count when adding up the value of your assets. Or, said another way, it is all assets of any kind that are not excluded assets (e.g., non-countable assets). Very generally speaking, the only non-countable assets are: your homestead, household and personal goods, a vehicle, a very small amount of life insurance (this one requires a very detailed review of the policy itself), and certain types of burial and funeral arrangements (not all such arrangements are excluded).

That is just a brief overview of what Medicaid is (and what it is not). You will see all sorts of different approaches and planning philosophies out there when it comes to Medicaid and Medicaid planning. My personal viewpoint is if you can afford to pay for your own care, you should want to.  If for no other reason than you tend to have more choices when you do.

Make sure to be watching for Part 2 of my “what is Medicaid” series.  It should be posted in the next few weeks.

Say Goodbye to Dower in Michigan

March 4, 2017 /

When you hear the word “dower”, what do you think of?  Many will say it reminds them of “dowery”.  Well, it is not really dowery.  We are not talking about a sum of money or property that a father gives to a future son-in-law when he marries the father’s daughter.  Dower is a holdover law from a LONG, long time ago (but not necessarily in a galaxy far, far away). In short, dower was a right that a married woman had in the real estate owned by her husband. To be exact (and to cause you a headache), it is technically “the use during her natural life, of 1/3 part of all the lands whereof her husband was seized of an estate of inheritance, at any time during the marriage, unless she is lawfully barred thereof.” It was initially instituted as a way to make sure a wife was not left destitute if her husband disinherited her and passed away. Interestingly, Michigan had no equivalent law for men. And Michigan is one of the last holdouts for dower – one of only 7 states that still have a dower right in their law.

But that will officially be no more on April 5, 2017. On January 5, 2017, the Governor signed a series of bills that abolishes dower, effective 90 days from the signing (thus, the April 5th date). This is big, big news in 3 main legal practice areas: (1) estate planning, (2) real estate law, and (3) family law.

Many families have never heard of dower.  And even as a Grand Rapids, Michigan estate planning attorney, I have not had any dower cases.  But, even so, you may have had to take certain steps with real estate because of it, and I have certainly had to take certain steps in client documents because of it. The most common dower implication is that when a married man owns property in his individual and decides to sell it, his wife still needs to sign the deed even though her name was not on it. It does not matter whether the property was purchased before or after the marriage – she has to sign in both cases. After April 5, 2017 that will no longer be the case.

Dower was an important legal component back when Michigan had no “forced share” law for a spouse to inherit by. Based on Michigan law allowing a spouse the right to a certain amount of his/her deceased spouse’s assets, it seems a good time to bid adieu to dower. This is a positive change for Michigan law and updates it in light of current inheritance law.

Michigan ABLE Accounts Arrive | Michigan Special Needs Planning

December 11, 2016 /

Going back almost two years, you may remember me mentioning in this post that Michigan enacted its version of the ABLE Act (Achieving a Better Life Experience Act).  Although Michigan passed its version of the ABLE Act in October of 2015, you could not form a Michigan ABLE account until just recently. This is because there was no established rule for how the accounts would be regulated and what financial institutions would manage them. Well, I have good news.  The wait is now over – Michigan officially has ABLE accounts.

Why does this matter?  Well, for many years, individuals with disabilities (and their caregivers) have faced a difficult decision if they received money in their own name via inheritance, personal injury settlement, or gift – spend it all, pursue a court-created trust or non-profit “pooled” trust, or risk losing vital government assistance.  As with many things, more choices mean a better chance of a choice that fits your situation.

The ABLE account offers a new, additional option for individuals with special needs.  In short, an ABLE account allows certain people with disabilities to have special savings accounts for disability-related expenses without losing eligibility under SSI, Medicaid, and certain other public benefits.  By putting funds in an ABLE account, those funds are not considered a “resource” for the person with the disability (it does not count against him or her).  There are limits on the contributions to the account: no more than $14,000 per year and no more than $100,000 total.  Anything above the maximum amount is considered a “resource”.  The account funds can be used generally for expenses related to the individual’s disability including education, housing, transportation, employment training and support, assistive technology and personal support services, legal fees expenses for oversight and monitoring and funeral and burial expenses.  A Michigan ABLE account has a $45 per year fee, plus the investment expense associated with the individual’s chosen investment option(s).  You can find more information, and open an account, at www.miable.org.

It is important to know that an ABLE account is not the solution in every situation.  Other planning strategies are still valid and may be a better option.  The ABLE account is an additional option.  If you have questions about or need help ensuring the maximum benefit and quality of life for a disabled family member or friend, please contact me.  As a Grand Rapids, MI special needs planning attorney, I am happy to help.

ATF Regulation 41F and Gun Trusts – Moving Forward

July 12, 2016 /

Well, the “dreaded” day is upon us.  The ATF’s rule 41F goes into effect tomorrow, Wednesday, July 13, 2016.  All Form 1 and Form 4’s that are postmarked July 12th or earlier will be processed under the current guidelines.  All that are postmarked on or after July 13th will be subject to the new guidelines.  If you are not familiar with 41F, you can read my previous blog post on it by clicking here.

I’m writing today because the ATF finally issued the new versions of the Form 1, Form 4 and Responsible Person Questionnaire that will need to be used starting July 13, 2016 going forward.  They have said they will not accept the existing forms for submissions on or after July 13, 2016.  Since the process takes plenty long on its own, do yourself a favor and make sure you use these new forms.  Here is where you can get each of them:

Form 1

Form 4

Responsible Person Questionnaire

If you need to order fingerprint cards, you can do that by clicking here.  You can find the ATF’s latest FAQ by clicking here.

Now, despite saying “dreaded” in my opening paragraph, the sky is not falling on gun trusts.  No doubt, there is definitely more red tape going forward.  But, gun trusts will remain the best option for many people who have (or plan to have) NFA items and/or a firearms collection.  The multiple authorized user and inheritance options will stay (and are very important).

If you have any questions, please contact me.

What Does New ATF Regulation 41F Do?

January 17, 2016 /

By now you have no doubt heard of the President’s latest efforts at gun control.  There is a LOT of misinformation about it in the media (not surprising), so I thought I would provide a quick summary.  For this post I am focusing on only the ATF’s final rule 41f (formerly known as rule 41p).  In case you prefer the full text rather than a summary, you can read all 67 pages here.

silencerATF rule 41f will change the requirements for purchasing Title II NFA items (silencers, short-barreled rifles, short-barreled shotguns, and full auto).   As noted above, 41f was previously known as 41p.  Although I still do not support the rule, the final rule ended up being much better than the proposed rule was.  Here is a quick list of the effects:

  • Individual purchasers will no longer need their Chief Law Enforcement Officer (CLEO) to approve their application, but they will need to notify the CLEO that they are applying for a tax stamp for a NFA item before submitting their application and will need to include the notice in their application materials.
  • In addition to the existing requirements, gun trust applicants will need to include the following with their application: (1) fingerprint cards, (2) passport quality photos,  and (3) a “responsible person” form.  These requirements apply to all current Trustees of the gun trust.   In the case of gun trusts I draft, that will be the client and their Co-trustees.  If someone else drafted your gun trust, you will need to check with the drafter for what is required or, if preferred, have me review and update the trust, as needed.  The gun trust applicant will also need to notify the CLEO before submitting their application and include a copy of the notice with their application materials.
  • Gun trust applicants may not need to do all of the above steps every time they apply.  So long as the gun trust applicant had an application approved in the previous 24 months and there has been no change to the documentation (e.g., gun trust, responsible person forms, etc.) previously provided, the applicant needs to provide only the following, in addition to the Form 4 or Form 1: (1) certification that the information had no changed since the prior approval, and (2) identification of the application for which the documentation had been submitted by form number, serial number, and date approved.  My recommendation would be to include a copy of the previously approved Form 4 or Form 1 (as the case may be) with the new application.
  • The changes do not take effect until 180 days after the rule is published in the Federal Register.  It was published on January 15, 2016, making the effective date July 13, 2016.  The existing process remains in place until July 13, 2016, and all applications (Form 1 and Form 4) that are “in process” on or before July 13, 2016 will be process under the existing rules, not the new rules.

machinegun-medSo, knowing that gun trusts are a significant part of my firearms law practice, what do I think of these changes?  As you might expect, I think the changes for individuals are great because it is less burdensome, and the changes for trusts are completely unnecessary and overly burdensome.  Is it the end of gun trusts?  No way!  First, from now until July 13, 2016 is a sweet opportunity to get a gun trust in place and purchase all the NFA items you want and can afford without having to deal with the overly burdensome requirements of the new regulation.  Second, gun trusts (LLCs and Corporations too, if necessary) are still going to be the only way to allow multiple people to have access to an item.  For instance, if I did not have a gun trust and instead I owned NFA items in my individual name, the mere fact that my wife has access to my gun safe without me present would be illegal.  Although others can use a NFA item under the direct supervision of an individual owner, with individual ownership only the person to whom the item is registered via tax stamp is allowed to have access to it.  With a gun trust, any Trustee can have access to and use the item without anyone else needing to be there and/or supervise.  This has and should continue to be one of the main reasons to have a gun trust.  The main effect I see the new regulations having on gun trusts is in the selection of Co-trustees.  I think more often than not, the Co-trustees of a gun trust will need to be geographically close due to the logistical difficulties of long distance coordination of fingerprinting, etc., under the new regulation.

And with all regulations and laws, us firearms law and gun trust attorneys are already putting our heads together on ways to handle and work around the upcoming changes.  Keep your eyes peeled for future updates, this is a rapidly changing area and I hope to keep you up-to-date through this e-newsletter.

If you or someone you know have any questions or would like to get a gun trust started (if you do not have one already), please contact me.

Michael Lichterman is an estate planning and gun trust attorney who helps families and firearm owners create a lasting legacy by planning for their Whole Family Wealth™.  This goes beyond merely planning for finances – it’s about who your are and what’s important to you.  He focuses on estate and asset protection planning for  firearm owners (both NFA regulated and non-NFA regulated), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, family owned businesses and pet planning.  He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.

What Is a Trustee Supposed to Do?

September 6, 2015 /

This summer has brought an increase in contested probate matters – that is, family and/or friends not getting along, or people taking advantage of others based on their position of power in someone’s estate planning documents. In many of the cases, it was actual or alleged breach of duties by a person appointed as Trustee.

I will not get into the gory details of the cases we’ve had this summer (several of which are still pending), but I do think they emphasize one thing – we all should know who/what a Trustee is, what they are required to do, and what they can be liable for. Of course, I am not going to be able to go into too much detail in this post . . . well, I could, but it would put you to sleep, if you are not asleep already 😉

In short, a Trustee owns and manages property for the benefit of someone else. Most commonly, this is someone named to administer and distribute your revocable living trust during a period of your incapacity or after you pass away. It is not like managing your own finances. A Trustee has the power and the obligation to manage someone else’s (your) assets for the benefit of the beneficiaries named in the trust. It is not a role to take lightly.

As far as the powers the Trustee has, basically they can do anything you can do. Sell, buy, transfer, get loans, make loans, and, if the your trust specifically gives them the power, they can handle your business, specially regulated assets (e.g. firearms), and many other things.

But, as they say, with great power, comes great responsibility. The Trustee has several duties and obligations, all of which fall under the general heading of “fiduciary duties” – that is, duties that are owed to others based on the Trustee’s relation to them as Trustee. A short and non-exhaustive list of Trustee duties are:

  • Marshalling assets: gathering all of your assets together
  • Acquire a tax ID number, if the trust does not already have one
  • Inventory and appraise (formally or informally) trust asset
  •  Send legally required notices to trust beneficiaries within a certain timeframe
  • Keep the trust beneficiaries informed of trust assets
  • Invest trust assets as a “prudent person” would
  • Keep “accountings” (e.g. values, income and expenses) of trust assets and provide reports to beneficiaries no less than annually
  • Prepare and file trust tax returns (or, preferably, work with a qualified CPA to prepare and file them)
  • Make distributions as required in the Trustee agreement
  • When the trust is fully administered, close the trust

As you can see, there is a lot for a Trustee to do and to do correctly. The top two recommendations I make to Trustees are: (1) keep meticulous records on everything you do and why you did it, and (2) enlist the assistance of professionals, such as an Attorney, Financial Advisor, and CPA, to make sure you are properly administering the trust and the assets owned by it.

When choosing a Trustee, you should choose someone you trust and who is either capable of handling the above items on his/her own, or is willing to work with professionals who can guide him/her through the process. Given what is involved, it is not uncommon for families to choose a professional Trustee, such as a bank or trust company.

In closing, I would recommend that you bookmark this post.  Or, better yet, keep it yourself and share it to anyone who is named as a Trustee in your plan or who may be named in someone else’s plan (friend or family member).  It will be a good starting point if you (or they) are called upon to act as Trustee.

And remember, if you ever have a questions, please contact me.

Growing Issues with Elder Financial Abuse

April 12, 2015 /

I just wanted to write a quick blog post on the topic of elder financial abuse, as we are seeing a rise in these cases.  I have to admit that I am shocked at how some “friends” and even family take advantage of the more experienced generations.  Many times, the elder is taken advantage of by someone they trust.  And it is quite common to see the elder suffering from some level of cognitive impairment, such as alzheimer’s or dementia.  To get some basic information on what to look out for, take a look at these two sites: http://www.preventelderabuse.org/elderabuse/fin_abuse.html and
http://www.consumerreports.org/cro/magazine/2013/01/protecting-mom-dad-s-money/index.htm

As I mentioned, we are helping several families right now with holding responsible the scammers who took advantage of their older family member and recovering what we can of the financial losses.  Look for a follow-up blog post on the topic in the future.  In the meantime, if you or someone you know has an “older” friend or family member who they suspect may be a victim of elder financial abuse, please contact me.

The Importance of Planning Communication

February 21, 2015 /

grandmaI have had a lot of conversations recently centered around communication and financial information.  Each had its own twist, the context rarely being the same.  But, the two recurring themes were: (1) lack of organization and communication about your financial situations can cause a lot of frustration and expense if you are disabled or pass away, and (2) the process of creating and properly funding a living trust can help keep #1 from happening. I know it is not necessarily fun or exciting to talk about. Be that as it may, it can make a HUGE difference.

Here is one of the “bad” examples.  The person had a will-based estate plan that was put in place some time ago.  It will not shock you to know that a lot changed over the years.  In addition to not keeping the estate plan updated, the person never shared anything about the person’s financial situation (what they had, where it was, etc.).  I am now working with their family to try and sort everything out.  It is proving quite difficult.  Each financial institution seems to have different requirements for finding out information about accounts, and quite honestly, the family does not even know where to look.  It has led to a lot of frustration on their end and much higher legal fees as we help walk them through it and get the information they need.

On the flip side are a couple of clients who passed away in 2014.  Both had a trust-based plan that was fully funded.  If you are curious about what I mean by “fully funded”, you can read a blog post of mine on the topic by clicking here.  Because I work with clients to make sure their trust is fully funded, including putting together a spreadsheet of their assets, there is a list of the “what” and “where”.  I also tend to find that by talking through the financial side of things with clients, they seem to be more willing to talk about it with those they have trusted with handling their financial affairs during their incapacity or after their passing.  In both of these cases, those people who were called upon to act as successor Trustees were able to quickly get a handle of the financial side of things which, in turn, led to a quick, smooth, and less costly transition.

Now, don’t get me wrong – there are always exceptions to these examples.  Having a will-based plan does not mean that administering your estate will be a frustrating and costly experience.  And likewise, just having a trust does not guarantee that everything will be smooth sailing.  But, I have generally found the exceptions to be few and far between.  Whether a will-based plan or a trust-based plan, the important part is to make sure to keep track of your financial affairs and communicate with those you choose to help with your estate.  A well-qualified financial advisor can be a big help with this process too, so do not overlook them.

As you know, I welcome questions, comments, and stories about the topic, so please let me know if you have any.

How Do I Apply For a Tax Stamp with a Michigan Gun Trust?

February 15, 2015 /

machine_gunAs a Michigan NFA gun trust attorney, there are some questions that I am asked on a regular basis.  I am going to try to cover them over a series of posts.  The first and, by far, most common question is, “how do I apply for a tax stamp for my NFA item using my gun trust?”  The “how” is heavy on the paperwork side.

If you worked with me to put your gun trust together, you must send the following to the ATF to get a tax stamp:

  • A copy of the entire trust itself (this includes the trustee declarations at the end of the trust);
  • The signed Assignment Page to the trust listing the make/model/serial number of the item you are purchasing or manufacturing;
  • A copy of all amendments to the trust (if there are any);
  • Two original double-sided ATF Form 4 (if purchasing the item or otherwise having it transferred to you) or ATF Form 1 (if manufacturing . . . for example, making a short-barreled rifle (SBR) or short-barreled shotgun (SBS) from an existing rifle or shotgun);
  • A Certification of Compliance (ATF Form 5330.20); and
  • A check for the tax ($200 for a Form 4 or Form 1) made out to “Bureau of Alcohol, Tobacco, Firearms and Explosives”.

Currently, all of the above should be sent by a trackable courier to the following:

National Firearms Act Branch
Bureau of Alcohol, Tobacco, Firearms and Explosives
P.O. Box 530298
Atlanta, GA 30353-0298

If you do not yet have a gun trust in place, do not wait any longer.  Now is the time.  Call me at 827-7596 and I will help you take the important step of putting a gun trust together!

ABLE Accounts and Michigan Special Needs Planning

January 18, 2015 /

In the flurry of new laws passed at the end of 2013, there was a law that provides additional options for individuals with special needs or disabilities.  The law is called the ABLE Act – the “Achieving a Better Life Experience” Act. It had overwhelming support from all political parties, something that is rare these days. As you might expect, I am not able to cover all the details one blog post, especially when much of the “nuts and bolts” of how ABLE accounts will work has yet to be figured out through the regulatory process.  So, I will attempt to summarize the act and some important considerations.

10674802805_a9b0103bf6_mThe ABLE Act recognizes that there are additional financial strains faced by individuals with disabilities and their families, including those in the Grand Rapids, Michigan area.  In short, the ABLE Act allows for individuals to utilize a tax-free, state-based private savings account, referred to as an ABLE account, for the care of people with disabilities. This ABLE account can be used to supplement government benefits for “qualified disability expenses” such as medical and dental care, education, employment training, housing, and transportation, while not disqualifying a disabled individual from governmental benefits. As a result of the ABLE Act, eligible individuals and families are now allowed to establish ABLE savings accounts that will not affect their eligibility for Supplemental Security Income, Medicaid and other public benefits.

The ABLE Act states that eligibility will be limited to those individuals with “significant disabilities” with an age of onset of disability before turning 26 years of age. It is important to note that the person does not have to be under 26 years of age, just that the onset of the disability was before turning 26 years of age. Additionally, there are dollar limits on the amount that can be contributed to an ABLE account, both on an annual basis and as a total dollar amount in the account.  The annual contribution limit is $14,000 and the overall amount allowed in the account is $100,000.  To exceed either limit would disqualify the account as an ABLE account, a potentially disastrous result.

Keep in mind, this is not something you can set up immediately. Congress put the general structure in place and it was signed in to law, however regulations must be established before states can begin to set up procedures for managing ABLE accounts. It will likely be late this year before you can set up an ABLE account.

Keep in mind, an ABLE account is not a one size fits all solution for everyone.  An ABLE account is not without its drawbacks.  One of the biggest drawbacks of an ABLE account is that any money remaining in the account upon the passing of the ABLE account holder must be used first to pay back the State for care provided to the account holder.  Many of the planning options that are already available for someone with different abilities continue to provide a better approach for many families.  For example, a special needs trust will likely continue to be the best option for many Grand Rapids, MI area individuals and families.  Why?  For a few main reasons:

  • There is no maximum annual contribution amount
  • There is no maximum allowed amount
  • There is much more flexibility in how the assets are invested
  • You maintain more control over how the assets are used
  • Assets in a special needs trust are not subject to the Medicaid and/or SSI payback to which an ABLE account is subject.

I cannot overemphasize the importance of that last point.  If you, as a family member or friend put money into an ABLE account for someone, that money will be subject to Medicaid and/or SSI claims upon the ABLE account holder’s passing.   Yet, if you established a special needs trust (or contributed to one that was already established), no such “payback” is required and you can specify what happens with the remaining trust assets when the beneficiary passes away.  In short, you have more control.

All that said, an ABLE account is another “tool” in the planning “toolbox” and will help some families and individuals who may otherwise be disqualified from government benefits.