The Essentials of Estate Planning and Elder Law
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For nearly a decade, people with disabilities have had the option to accumulate savings in a special tax-free account – without risking their means-tested public benefits. In 2024, the annual limit on how much money one can deposit into these savings vehicles, known as ABLE accounts, will rise, allowing individuals to add up to $18,000 per year.
What Is an ABLE Account?
Many people across the disability community rely on such government assistance as Medicaid, Supplemental Nutrition Assistance Program (SNAP) benefits, or Supplemental Security Income (SSI). Yet having too many assets to their name can disqualify them from receiving these often critical benefits. For example, in most states, the resource limit to qualify for Medicaid is just $2,000. In 2014, Congress signed the Achieving a Better Life Experience (ABLE) Act into law to help address this issue.
Individuals with an ABLE account can save up to a total of $100,000 – tax-free – while remaining eligible for public assistance programs. Family members, friends, and others can make contributions to the account, too. The disabled person can then use these funds to help maintain their independence by spending them on disability-related expenses, including assistive technologies, education, transportation needs, vacations, legal fees, and health care.
Unlike a special needs trust (SNT), an ABLE account can be opened by the individual with the disability. This offers them more control over the account funds compared with an SNT. ABLE accounts and special needs trusts often work in tandem as part of a well-developed special needs plan. You’ll want to consult with your special needs planning attorney at Elville and Associates to discuss how these tools work together to help achieve the best results for your loved one with disabilities.
Starting in 2024, the annual limit on contributions to ABLE accounts will be $18,000, up from $17,000 in 2023. Through the end of 2025, ABLE account owners who work can contribute their employment income to these savings vehicles even beyond the per-year deposit limit. (Learn more about these rules under the ABLE to Work Act.)
The idea for these accounts derived from the concept of a 529 college savings plan. Similar to a 529 plan, funds in an ABLE account grow tax-deferred over time. In addition, each state administers its own ABLE account program.
To qualify, you must meet the Social Security Administration’s strict definition of “disabled.” You also must have incurred your disability before age 26. (Note that the age cutoff will shift to age 46 come 2026. According to estimates, this age adjustment will result in roughly 6 million more individuals becoming eligible to open these types of savings accounts.)
Why Open an ABLE Account?
People with disabilities are among those most at risk for financial disaster. According to research, just 10 percent of people of working age who are living with a disability are financially healthy.
ABLE Accounts, or 529A accounts, can serve as a form of future financial support for these individuals. Yet the vast majority of those who could benefit from these accounts remain unaware of them. As of 2022, 8 million people were eligible for this type of account, yet a mere 120,000 had one in place.
Get Support With ABLE Accounts
To learn more about setting up this type of savings account, consult with the special needs planning attorneys here at Elville and Associates – and also learn how an ABLE account can be part of a comprehensive estate and special needs plan for yourself of your loved one with a disability. Initial consultations are typically free and the most ideal way for your attorney to understand your individual or family’s situation, answer your specific questions, and create solutions and a path forward for you.
With the arrival of the new year, revisions to the annual gift tax and estate tax exclusions will be going into effect, as recently announced by the Internal Revenue Service (IRS).
Gift Tax Exemption for 2024
Every calendar year, you can gift up to a certain amount to another individual (or individuals) tax-free. These gifts can include cash as well as other types of property. The IRS typically adjusts this gift tax exclusion each year based on inflation.
Starting on January 1, 2024, the annual exclusion on gifts will be $18,000 per recipient (up from $17,000 in 2023). A married couple filing jointly can double this amount and gift individuals $36,000 apiece in 2024.
This means that if an individual taxpayer gifts less than $18,000 to any one person during 2024, they generally don’t have to report the gift to the IRS. However, if they gift more than $18,000 to someone in 2024, the gift giver must then file a gift tax return. (Note that the gift giver may not necessarily have to pay a gift tax when giving a gift of more than $18,000 to someone. This is because they can choose to apply their lifetime gift tax exclusion. Learn more about lifetime gift tax limits below.)
2024 Federal Estate Tax Exemption
The federal estate tax exemption is also set to increase come 2024. It will rise to $13.61 million in 2024 (up from $12.92 million in 2023). For couples, this exemption will equal $27.22 million.
In other words, an individual’s estate valued at less than $13.61 million in 2024 will not be subject to federal estate taxes. Most people, of course, are not multi-millionaires. Today, heirs of only a small fraction of the most affluent Americans need worry about the impact of the federal estate tax. (State estate taxes are a different story; those vary depending on where you live.)
Imagine Vanessa, a successful, single business owner with a total taxable estate worth $16 million. As a wealthy individual, Vanessa would likely want to consider how federal estate taxes could affect her heirs. If she were to pass away in 2024, her $16 million estate would exceed the $13.61 million threshold and owe the IRS a federal estate tax.
This is why very affluent people may choose to gift assets to loved ones during their lifetime. It is one way to help cut down on the taxes their estate will need to pay upon their death.
Combined Gift and Estate Tax Exclusions
Over the course of your lifetime, you can give away only up to a certain amount before the IRS imposes taxes. This limit is called the “lifetime, or combined, gift and estate tax exemption.” Because it’s linked to the federal estate tax exemption, it, too, is set to increase in 2024 – to $13.61 million for individuals and $27.22 million for couples.
Perhaps Vanessa decides to give a vacation home worth $1 million to her only child. She could take advantage of the lifetime gift and estate tax exemption by deducting $982,000 from her combined exemption ($1 million minus $18,000 = $982,000). This would allow Vanessa to give away another $12.62 million in assets before meeting her lifetime gift exclusion limit ($13.61 million minus $982,000 = $12.62 million).
It’s important to note that this high lifetime gift and estate tax exclusion of $13.61 million is currently on track to decrease drastically at the end of 2025, to about $6 million. For high-net-worth individuals who die in 2026, there may be tax implications for their estates. (Read more about the sunset of the Tax Cuts and Jobs Act and strategies that may help avoid any negative impacts.)
Consult With Your Estate Planner
The rules regarding gift and estate taxes can get quite complex quickly. For instance, on top of federal taxes, some states – including Maryland – impose an estate tax and even an inheritance tax. Consult with the estate planning and elder law attorney at Elville and Attorneys. They can help you plan for your legacy by finding the most ideal tax planning strategies for your specific situation.
About 45 percent of adults say they plan to travel for the holidays, per The Vacationer.
With multiple generations getting together for holiday meals, gift exchanges and quality time, these annual gatherings present an opportunity to broach sensitive but important topics with your aging loved ones. By communicating with them and knowing their wishes, you can help them plan for their future.
Key Considerations in Aging
Understanding how the older adults in your life feel about certain issues – such as where they want to live and what kind of care they would like to receive as they continue to age – can help you provide appropriate support. Having these discussions can also help your loved ones reflect on their goals and consider making plans before there is a crisis.
If your family member still needs to meet with an estate planner, you can also suggest taking this step. Connecting them with the experienced elder law and estate planning attorneys at Elville and Associates is a great first step!
According to Caring.com’s 2023 Wills and Estate Planning Survey, two out of three Americans have yet to make an estate plan and do not have any estate planning documents. Such documents can include a will, power of attorney, portable medical order, and advance directive. Barriers to estate planning include procrastination and not believing one has enough assets; however, the reality is every adult – regardless of asset level, health situation, or other factors needs an estate plan in place. Otherwise, the courts will get involved once the person passes away and his or her estate may not flow as the decedent desired.
Yet, while we often think of estate planning as making wills and determining who receives assets, it is an integral part of preparing for old age. It encompasses housing and long-term care, financial planning, medical care, and insurance. Creating an estate plan involves making decisions about how people would like to live and receive care as they age.
Most people could benefit from this type of planning (no matter what their age). Talking with your loved ones can be an initial step to help them develop a plan that preserves their autonomy in old age.
What to Discuss With Your Older Loved Ones
As the holidays get underway, prompt your family members to start thinking about their future. You may encourage them to consider the following topics and questions:
Housing Options
AARP reports that 77 percent of adults 50 and older want to age in place instead of moving into senior living. Yet remaining at home poses safety concerns for many families, according to the National Institute on Aging.
Older adults may eventually need help with activities of daily living (ADLs), household tasks, mobility, meals, health care, and transportation. Families may be able to provide caregiving or explore in-home services. Others may choose assisted living.
The following questions may help to spark meaningful discussions between you and your aging loved ones.
- Where do they want to live? Do they want to live at home as they get older, or would they prefer to reside in a senior living community?
- If they would like to stay at home, is the residence adaptable to any potential mobility difficulties they may face down the road?
- What kind of additional support might they need?
- Who will help with their activities of daily living and household chores such as preparing meals or cutting the grass?
Health Care Preferences
Health challenges often accompany aging. According to the National Council on Aging, 95 percent of adults 60 and older have at least one chronic condition.
As the seventh leading cause of death worldwide, dementia affects many older adults, per the World Health Organization. The National Institute of Health reports that one in seven Americans age 71 and older have dementia.
Older adults should think about and communicate their health care wishes with their families before an adverse health event occurs. The following questions can help families begin these difficult discussions.
- Do they have a power of attorney or living will, or are they planning to create one?
- What would make life continue to be worthwhile for them if they were to become frail, ill, or develop dementia?
- Would they want medical care to prolong their life if they have a terminal, incurable illness?
- If they fell ill, would they prefer to pass away at home in hospice or in a medical setting?
Personal Values
Having a clear picture of what someone would value most at the end of their life can help families provide support. Erik Erickson’s stage theory of psychosocial development suggests that older adults living in line with their personal values may feel peace, wisdom, and acceptance.
Physical and cognitive decline associated with aging can jeopardize autonomy. This is why knowing your loved ones’ values and wishes can help you more effectively support their independence. They should have a plan in place for end-of-life decisions so that, if necessary, you or another surrogate decision-maker can make choices that reflect their wishes.
These questions present a good starting point.
- What does your loved one believe they will come to value most as they grow older?
- Is religious or community involvement important?
- What do they define as a good life?
- What do they feel would be most essential to them in their final years?
- What kind of funeral or memorial service would they envision for themselves?
- Have they thought about passing certain sentimental items, such as photo albums and jewelry, to certain family members?
Consult With Your Estate Planning Attorney
As you and your loved ones work together to begin addressing these topics, work in partnership with the estate and elder law attorneys at Elville and Associates. An ideal starting point is an initial consultation. Consultations are the best and most ideal way to have your attorney understand your situation, answer your specific questions, offer education and counseling, and create a path forward and solutions for you. They can help create a framework for autonomy in older age, working with your loved ones and you to develop a plan.
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Estate Planning for Surviving Spouses
After losing a spouse or longtime partner, it’s very difficult to look past your grief. However, it’s also important to understand the timely decisions you must make regarding your finances and personal estate plan.
Estate planning is an ongoing process, as it accounts for changes in marriages, deaths, divorces, and births of children and grandchildren. Assuming your spouse left an updated estate plan before their passing can have unintended consequences.
Review Both Estate Plans
To avoid problems, first schedule a meeting with your estate planning attorney at Elville and Associates. With them, you can take some time to review your estate plan as well as your spouse’s.
It is not uncommon to discover assets you are unaware of, allowing for planning opportunities to transfer tax-free wealth. With the loss of a spouse’s income, uncovering assets may also help secure a widow or widower’s finances. You may also discover incomplete beneficiary designations, incorrect titling of assets, or an overlooked grandchild who is new to the family.
Rules and Deadlines Regarding Asset Transfers
Your estate planning attorney can also advise you of the decision-making deadlines inherent to your situation. There are some powerful wealth transfer tools available to you as a surviving spouse. For instance, you may opt to transfer interest in some of your late spouse’s assets to other beneficiaries. Note, however, that this must occur within nine months of your spouse’s date of death.
Tax Laws That Affect Your Inheritance
Inheritance tax laws can be confusing. As a surviving spouse, you have the option to file a federal tax return for that year as a single individual or as a married couple to receive higher deductions as long as you don’t remarry that year.
Regarding the decedent’s estate tax return, a surviving spouse may need to make a portability election maximizing the amount transferred estate-tax-free to the next generation. If the decedent didn’t use a revocable trust to shelter assets from the probate process, there are timelines to meet with the probate court. Many more scenarios exist, and a surviving spouse must prioritize assessing the estate plan and finances while grieving.
After a spouse passes, much of the attention of legal services focuses on managing their estate, rather than the legal needs of the surviving spouse. There are circumstances when wills and trust configurations permit a surviving spouse a “second look” to see if the decedent’s estate plan is still a proper fit. Existing estate plan documents in the surviving spouse’s name require review to change beneficiaries or representatives as necessary.
Aside from Wills and Trusts, Review Related Legal Documents
Durable Powers of Attorney (DPOA)
A durable power of attorney lets you name an individual to act on your behalf for financial matters. During your lifetime, this person is typically your spouse. As the surviving spouse, you must identify another trusted person to replace your spouse as power of attorney.
Medical Power of Attorney (Health Care Proxies)
You’ll also have to select an individual as your new health care agent if your spouse had been your representative. If you become ill and cannot communicate your health care decisions, your medical POA can make medical decisions on your behalf. If you have an alternate designation on the health care proxy, review the choice to ensure that person is still appropriate. Or, you may remove them and name a new health care agent.
These documents are often on file with your primary care physician. Be sure to provide an updated copy to anyone who has the old document and make them aware of any changes.
HIPAA Release Forms
Even if you have a medical power of attorney, you may still want to ensure that other family members can discuss your health situation with medical professionals. If so, you must sign a HIPAA release form to access your medical records. Be sure your primary care provider has a legal copy of this form.
Consult With Your Estate Planner
Reviewing and making appropriate changes to your estate plan with guidance from your estate attorney at Elville and Associates will protect you as a widow or widower. It’s a challenge to review this during an emotional time, but preparing yourself for the future will provide you peace of mind in the short- and long-term. Discussing your planning with an attorney is the best way to get your specific questions answered, have your attorney understand your situation, and partner with you to help create solutions and a solid path forward for your planning needs.
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For many people with disabilities, maintaining financial well-being can prove particularly challenging amid the marginalization, societal stereotypes, and employment and health care barriers they may regularly face. This includes anything from inaccessible workplaces to reduced income to limited options for building up their savings.
Financial Health of People With Disabilities
According to a new report, those individuals with disabilities who receive benefits from means-tested programs like Supplemental Security Income (SSI) and Medicaid are at the most risk for financial challenges after an emergency.
Compiled by the Harkin Institute, National Disability Institute, and the Financial Health Network, the report surveyed people with disabilities on a variety of factors related to their spending, saving, borrowing, and planning habits to calculate their financial resilience.
The findings reveal that only 10 percent of people of working age in the disability community are financially healthy today. Meanwhile, a third of working-age people with disabilities are categorized as financially vulnerable, compared with 12 percent of people of working age without disabilities. These individuals may have significant debt and little or no emergency savings, and may often be living paycheck to paycheck.
When it comes to long-term savings, the report highlights ABLE accounts as one viable option for many people with disabilities who receive government means-tested benefits. Yet the researchers find that awareness of the benefits of these accounts among individuals with disabilities is severely lacking.
What Is an ABLE Account?
ABLE accounts are a type of savings account that allows qualifying people with disabilities to save $17,000 a year (in 2023), tax-free, without losing their eligibility for public benefits. An ABLE account helps beneficiaries of means-tested programs like SSI circumvent the strict asset and income requirements, allowing them to save up to $100,000 without penalty.
The money in this type of account can be used for the account holder’s benefit. Money held in an ABLE account can pay for such expenses as the following:
- Basic living expenses
- Education
- Housing expenses
- Transportation services
- Education and training
- Assistive technology
In addition to the ability to place money aside without losing benefits, the purpose of an ABLE account is to create a safety net that can reduce a beneficiary’s stress regarding their finances.
What Are the Qualifications for an ABLE Account in 2023?
As of 2023, these are the ABLE account requirements:
- The account holder must have been disabled before they turned 26 years old.
- The individual must either already be receiving benefits under SSI or SSDI, or they must have a letter of certification from a licensed physician stating that they meet the SSA’s criteria regarding significant functional limitations.
Note that in January 2026, the age limit will be extended. At that time, to be eligible for an ABLE account, beneficiaries will have to prove that their disability began before the age of 46.
Continued Financial Hardship May Create Another Barrier for Eligible Account Holders
Despite the benefits of using ABLE accounts, there are downsides that can keep people across the disability community from achieving financial health, according to the report.
ABLE accounts require a minimum balance and sometimes an annual fee, which may create a barrier to financial health for otherwise eligible participants. Many individuals have a hard time putting enough money aside to start utilizing an ABLE account. Being unable to contribute consistently poses a risk that their ABLE account will fall below the required minimum balance.
While anyone can contribute to an individual’s ABLE account, many families have trouble putting together enough money to take full advantage of their ABLE account.
Most People Eligible for an ABLE Account Are Unaware of the Service
Despite its benefits, many people who are eligible for an ABLE account do not know that these accounts exist. Findings from the report uncover the following:
- In 2022, only 120,000 of the estimated 8 million nationwide eligible beneficiaries have opened an ABLE account.
- Less than one percent of the eligible disabled survey participants had an ABLE account, all of whom had less than $10,000 in their accounts.
- 93 percent of survey respondents said they were unfamiliar with ABLE accounts.
In addition, the report states, “ABLE accounts also remain unfamiliar to many service providers who serve people with disabilities and could provide a critical link to helping provide access.”
To learn more about how to set up an ABLE account, consult with the special needs planning attorneys at Elville and Associates. To visit the Maryland ABLE account website, please visit https://www.marylandable.org/. ABLE accounts are also an integral part of an overall plan for your loved one with disabilities and work in concert with a supplemental/special needs trust. To discuss your loved one’s future with your special needs planning attorney at Elville and Associates, please visit here.
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