There are several types of trusts that many families establish for the benefit of individuals with special needs. 'Every parent should consider doing this,' says McNeeley, who is also a consultant for Fidelity's Lifetime Engagement group, 'but especially so if you have a child with special needs, and if you couple that with having a detailed care plan, you can help make sure that your loved one's future care team is set up for success.' One very important thing is to have a legal guardianship plan in place in case one of the caregivers dies. If the assets go to the child, that could interfere with their ability to receive Social Security income for disability benefits. It can be hard for families to look far down the road and think about what happens when primary caregivers are no longer able to care for their loved one, but setting up for the future can prevent mistakes later on that could negatively impact benefits and cause conflict.įor instance, it may not be a good idea to list a person with special needs as the beneficiary on a parent's financial and retirement accounts. Note: SECURE 2.0, enacted at the end of 2022, increases the disability onset age for a qualifying disability for an ABLE account to 46 years old from 26 starting in 2026. However, the ABLE to Work provision of the Tax Cuts and Jobs Act of 2017 allows ABLE account owners who can work to save an additional amount equal to the lesser of their compensation for the taxable year, or an amount equal to the federal poverty level, which is $14,580 per single-person household in 2023 ($18,210 for Alaska residents and $16,770 for Hawaii residents).Īdditionally, if the total assets in the ABLE account exceed $100,000, Social Security for the person with disabilities may be suspended. In 2023, the limit is $17,000 from all contributors in aggregate. It's important to know that ABLE accounts do have an annual contribution limit. These accounts don't make sense for everyone, so consult with a financial advisor to see if it is a good strategy for you.

What's more, after-tax contributions to these accounts can grow tax-deferred, and if withdrawals are used for qualified disability expenses, which includes but is not limited to rent, food, transportation, education and employment training, health care, and personal support services, any earnings on such distributions will be federal income tax-free. But by saving in an ABLE account, some families can help shield contributions from that countable-resources limit. Individuals lose eligibility to certain government benefits if they have more than $2,000 in countable resources ($3,000, if married), according to the Social Security Administration.

One account some families use to provide for special needs adults is the ABLE account, a tax-advantaged savings account for individuals with disabilities, named from the Achieving a Better Life Experience Act of 2014. When you determine the severity of the need, you can then figure out what level of local and federal benefits are involved. A good test for when you need to do advanced financial planning for an individual with special needs is if you anticipate them needing assistance caring for themselves through adulthood.

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