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Proposed law changes could improve tools in special needs plans

For those with family members who have special needs, ensuring that there are adequate resources for the care of their loved one takes research and planning. This entails not only looking into and pursuing the government programs and benefits available to support that family member, particularly as he or she moves into adulthood, but also setting aside funds to provide for that family member's care.

One of the tools used to do this is special needs trusts, which may be set up by family members or established by the courts. Sometimes called supplemental needs trusts, these trusts allow family members to put an unlimited amount of assets in trust for the benefit of a special needs family member. Assets in the trust are protected from creditors and are not counted toward the special needs individual's qualification for government benefits. 

Another tool sometimes used for special needs individuals is a special account authorized by federal law. Under the Achieving a Better Life Experience Act, also known as ABLE, those with disabilities may set up accounts which are not factored into decisions regarding eligibility for government benefits such as Social Security and Medicaid. These accounts may hold up to $100,000, with a limit of $14,000 in deposits per year.

Both of these tools may soon be undergoing improvements if Congress approves of proposed changes. Under the Special Needs Trust Fairness and Medicaid Improvement Act, special needs individuals would be allowed to establish their own trusts rather than relying on family members or the courts to do it for them, as is required under current law. Also, under the ABLE Financial Planning Act, families would be allowed to transfer money saved for a special needs individual in a 529 savings plan to an ABLE account, which is not allowed under current law. The new law would also increase the annual deposit limit to nearly double what it is at present. The changes are expected to help improve the ability of families with special needs members to provide for their loved one.

Planning around federal law for those with special needs is not always a straightforward matter, and it can help to work with an experienced attorney, particularly when setting up a trust. Doing so ensures that the family has solid guidance setting aside financial resources to benefit their loved one. 

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