ABLE 529 Update

Hi all!  I have an update on Ohio’s implementation of their ABLE 529 account.  I get updates every so often from State Representative (and former curler) Tim Brown.  He says that Ohio’s funding has been ensured for HB 155, or as we know it, Ohio’s ABLE Act.  This funding is part of the budget that has been submitted to to Governor Kasich for his signature.  This is very exciting for both special needs families and planners alike.

A short update, I know, but I had to share the good news.

How should my Special Needs Trust (SNT) be used?

Special needs trusts (SNTs) are great tools, but fickle creatures.  They are kind of like the Wizard pocket organizer from Seinfeld.  For those Seinfeld junkies, you will remember the Wizard as the pocket organizer that Jerry gave to his dad who proceeded to only use it as a tip calculator to which Jerry would always yell, “It does other things”.  SNTs are like the Wizard (or the Willard if you got one from Bob Sacamano, Sr., but I digress), everyone has one (or should have one), but do they know how to use it?

The number one thing that you SHOULD NOT do with a SNT, is take cash out of it and give it to the beneficiary.  This is a terrible idea.  Any cash distributions will reduce SSI benefits on a dollar for dollar basis.  Do you see why this is a terrible thing to do?  Good, so just don’t do it.

The second thing you probably SHOULD NOT do is pay for things like food, shelter, and utilities.  Remember, a significant portion of the benefits that your beneficiary is receiving are for things like food, housing, utilities, etc.  The point of the SNT is to SUPPLEMENT your beneficiaries benefits, not replace them.  If you wanted to use money on necessities, then bag the benefits and just pay out of pocket.  That doesn’t make a whole lot of sense, so don’t do it.  Paying for necessities will incur a similar reduction in benefits.  So what can you do?

You can do pretty much anything else.  Use the SNT for its purpose, to enhance your beneficiaries life and experiences.  Be a good steward of the assets, but at the same time, allow your beneficiary to enjoy a full and rich life that they otherwise wouldn’t be able to experience.

Be Careful With (d)(4)(A) SNT Distributions

Federal Court Rules on Section 8 Eligibility

A Federal Court in Massachusetts recently ruled that a woman was ineligible for Section 8 housing assistance because she received over $60,000 worth of expenditures from her (d)(4)(A) Trust.

This is another example of where 1st Person SNTs walk a tight rope.  How much is too much?  I think that people have got to vigilant and aware of the rules when they use money from an SNT.  Trustees can’t just be handing out money left and right from these trusts without being cognizant of what the impact is going to be on their beneficiary. The very point of these trusts is to keep benefits, what good are they if the money is going to be blown anyway and the beneficiary loses their benefits.

On the other hand, what makes housing so special? Should HUD be counting trust distributions as income?  I know that they do, but should they?  Should 1st and 3rd Person SNTs be treated the same by HUD or should 1st Persons be exempt?  Personally and professionally, I think counting distributions from a 1st Person SNT is a bad rule.  The point of the law is to protect benefits, so let’s protect benefits, housing included.