Breaking Disability Law News

Michael J. Feinfeld on April 20, 2015

Do you have a disabled relative receiving government benefits but not enough money to set up a supplemental needs trust? Relief may be coming later this year.

At the end of 2014, President Obama signed into law new legislation allowing the parents or relatives of disabled individuals receiving government benefits, such as Medicaid or SSI benefits, to establish a tax deferred 529 plan to pay for certain expenses, a so called “529 ABLE account.”

The new law, which only allows for the establishment of one account per disabled individual, is slated to be enacted by individual states later this year after the period of time allotted for public comments expires.

The new law enables contributions to be made to 529 ABLE accounts to be made tax free by individuals (whether account owner their family members or friends, etc.) up to the amount of each person’s annual exclusion amount for gifts (i.e., $14,000 in 2015 indexed for inflation).

The assets distributed from these tax privileged accounts are not included in the disabled beneficiary’s gross income, will not be considered as a gift to the beneficiary, and will not count against the disabled beneficiary’s limitation on personal assets for the purposes of receiving government benefits.

The owner of a 529 ABLE account will be entitled to use distributions to pay for a disabled individual’s “qualified disability expenses” such as “education, housing, employment training and support … health, prevention and wellness, financial management and administrative services, legal fees … and funeral and burial expenses,” etc.

While such accounts do not appear to be quite as flexible as supplemental needs trusts, which allow the trustees to “supplement” the government benefits of disabled individuals through distributions of articles and goods for their benefit, the creation of a 529 ABLE account should be somewhat easier and less costly than creating a supplemental needs trust or a pooled income trust.

However, it is clear that relatives wishing to benefit their disabled relatives may benefit from the establishment of both a 529 ABLE account as well as a supplemental needs trust or pooled income trust, since these accounts and trusts appear to be complimentary to each other.

If you are interested in this powerful new program or have more questions about how we can help you care for a disabled child or a relative, please email me to discuss at

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