New Tax Law Boosts Michigan ABLE Accounts for the Disabled.

A MiABLE account allows a disabled Michigan resident to save money in an account in their own name and not jeopardize eligibility for needs-based government benefits such as Supplemental Security Income (SSI) and Medicaid. Money can be withdrawn from the account to pay for “qualified disability expenses” and such expenditures will not be counted as income to the disabled individual to determine eligibility for SSI or Medicaid. Further, there is no income taxation of the gain in value of a MiABLE account.

The recently enacted Tax Cuts and Jobs Act includes two provisions that enhance the benefits of MiABLE accounts for disabled Michigan residents:

One provision of the new tax law allows families to roll over funds that they may have saved in a 529 college savings account to a MiABLE account, provided that the beneficiary is the same individual on both accounts. The money can be transferred from a 529 account into a MiABLE account and the individual may still enjoy the benefits of the account funds without jeopardizing their eligibility for government benefits. This can be an important benefit if a disability occurs after birth or is not readily apparent at birth, and it is not likely that the disabled person will not be able to attend college. For example, grandparents set up and contribute to a 529 account for their newborn grandchild. The grandchild is later diagnosed with autism at age 11. The money the grandparents have deposited into the 529 account can be transferred to a MiABLE account for the grandchild without penalty.

The second provision allows a working disabled individual to contribute more than the current annual contribution limit of $15,000 to a MiABLE account without jeopardizing their eligibility for government benefits. Many disabled individuals want to work and are able to, but are discouraged from doing so because they may lose their SSI or Medicaid benefits if they earn too much money from a job.

Michigan Launches the MiABLE Account Program.

Michigan’s ABLE account program (“MiABLE”) has gone into effect. The program launched November 1, 2016.

MiABLE program accounts are modeled after 529 college savings accounts, and are meant to help persons with disabilities save money in their own names and allow tax advantaged distributions for certain expenses including housing, transportation, health and wellness, education and more, while maintaining eligibility for federal and state aid. Like 529 college savings accounts, if funds distributed from a MiABLE account are not used for qualifying expenses, any investment growth will be taxed at ordinary income tax rates, plus a 10% penalty. MiABLE account funds can be rolled over tax-free from one MiABLE account to another and the designated beneficiary can be changed from one disabled person in a family to another in the same family.

Some details for Michigan MiABLE accounts:

  • Six investment portfolio options are available, from conservative to aggressive portfolios.
  • Debit cards will become available to account holders in early 2017. This will make it easier for an account holder to access funds in their account.
  • A major benefit to a MiABLE account holder is the ability to post their account online, like GoFundMe accounts, to make it easier for third parties (parents, grandparents, siblings, etc.) to donate directly to the account.
  • MiABLE accounts will be charged an annual fee of $45.

More MiABLE account information, as well as online enrollment is available at

Court of Appeals Upholds Rejection of SSI Special Needs Trust

The 8th Circuit Court of Appeals recently upheld a decision by the Social Security Administration to reject a type of special needs trust, known as a “(d)(4)(A) trust” (a trust designed to hold the assets belonging to a disabled person). A (d)(4)(A) trust is commonly used in special needs planning to qualify a disabled individual for Social Security supplemental income (SSI) or Medicaid benefits. This type of trust must be created by a disabled individual’s parent, grandparent, guardian, or a court, to hold the disabled individual’s personal funds.  The disabled individual cannot establish this type of trust for themselves.

In Draper v Colvin, the parents of 18-year-old Stephany Draper, who had suffered a traumatic brain injury in an automobile accident, attempted to create a (d)(4)(A) special needs trust to hold and administer the proceeds of a personal injury settlement for her benefit. Stephany had granted power of attorney to her parents to settle her personal injury claim and transfer the settlement funds to a trust on her behalf. Her parents, acting individually, established the trust “pursuant to 42 U.S.C. § 1396p(d)(4)(A).” They then transferred the settlement proceeds (more than $400,000) into the trust by authority of the power of attorney.

In reviewing her claim for benefits, the Social Security Administration found that, despite the express language of the trust agreement to the contrary, Stephany’s parents were acting as her agents and not as her parents when they created the trust, and an agent is not a person authorized by the statute to create a (d)(4)(A) trust. Therefore, the settlement proceeds were countable assets in determining Stephany’s eligibility for SSI benefits. SSA rejected her claim because the settlement proceeds put her over the asset limit. The 8th Circuit Court of Appeals affirmed the SSA’s denial of benefits.

The case turned on a very technical interpretation of the Social Security rules in regards to the language of the trust agreement and the way in which the trust was created and funded. The case underscores how careful one must be when it comes to qualifying for governmental benefits such as Medicaid or SSI and how easy it can be to run afoul of the rules despite careful planning.

You may read the entire decision here.

Sad, Maddening, And Possibly the Longest of Long Waiting Lines.

The Social Security Administration judges who hear appeals for disability benefit claims are a staggering 990,399 cases behind.

According to a recent Washington Post story, the Social Security Administration first fell behind during the administration of President Ford – almost 40 years ago! The primary factors identified in the story as contributing to the backlog: A system that is too big to fix, outdated rules and procedures, and the “Dictionary of Occupational Titles,” last updated in 1991. Included among its list of jobs performed by working Americans are “telegram messenger,” “calculating machine operator,” and “switchboard operator”. The Dictionary does not mention the Internet at all.

At this point, an average disability claim takes over a year before a decision on benefits is rendered by an administrative law judge, during which applicants often wait without any source of income. It’s a long article, but one worth reading.

See: Washington Post. The Biggest Backlog in the Federal Government, October 18, 2014