Parents of a child with special needs continually look for ways to enrich the quality of their child’s life and ensure his or her future health and wellbeing. These goals can be achieved using a variety of planning tools, some of which are driven by whether the child’s disability either arose before age 26 or is expected to continue past that age.
Age 26 and Private Health Insurance Benefits
The Affordable Care Act (ACA) became effective in 2010, and if it continues in its present form, it requires group health plans and health insurance issuers that offer dependent child coverage to make that coverage available for an adult child until age 26. Employers are not required to offer dependent coverage but if they do, coverage must be provided to a participating parent’s children under age 26. A child is considered a dependent under the ACA solely based on the child’s relationship to the parent. As a result, dependent coverage under a parent’s private health insurance is available to a child who has not attained age 26 regardless of whether the child lives with the parent, is disabled, married, a student, employed or financially independent. The extended availability of health insurance to a child with disabilities is complimented by the fact that the ACA also prohibited insurance companies from denying coverage based on a child’s pre-existing medical conditions.
In New Hampshire, dependent coverage also must be extended to a child who is incapable of earning his or her own living. Although the ACA would permit a policy to terminate coverage when a child reaches age 26, New Hampshire requires that family-member coverage under the policy continue for an insured child who is mentally or physically incapable of earning a living on the date the child’s dependent status as a covered family member would expire due to age. The coverage under the policy continues as long as the child remains chiefly dependent on the parent who is the policy holder, employee or his or her estate charged for the care of the dependent.
Age 26 and Federal Employee Health Benefits
Following the health care reforms in 2010, Federal Employee Health Benefits now are available to family members up to age 26. In addition, coverage is available to a child who is age 26 or older if the child is incapable of self-support because of a physical or mental disability that existed before the child turned age 26. A child is considered incapable of self-support only if his or her physical or mental disability is expected to continue for at least one year and, because of the disability, he or she is not capable of working at a self-supporting job. The cash and health insurance benefits available to special needs children of federal employees are complex, and families should work with an attorney focusing in this area.
Age 26 and Achieving a Better Life Experience Act (ABLE) Accounts:
Many public benefits programs have financial eligibility criteria with very low resource limits. For instance, the resource limit for Supplemental Security Income (SSI) is $2,000. One way to exceed those limits, while still remaining financially eligible for certain public benefits programs, is through the creation of a special type of investment account under the Achieving a Better Life Experience Act (ABLE).
The ABLE Act has been in existence for several years, and over half of the states have established Qualified ABLE Programs. The ABLE Act allows an individual with disabilities to own significantly more resources in his or her name while still remaining eligible for certain public benefits programs such as Supplemental Security Income (SSI) and Medicaid. For instance, someone without an ABLE account only may have $2,000 in an account, but the same person could have up to $100,000 in a single ABLE account and still be eligible for SSI.
Although not a substitute for a third-party special needs trust created by a parent or other loved one as part of an overall estate plan, monies now can held in an ABLE account to be used to pay for certain disability-related expenses. Assets held in an ABLE account grow income-tax free if the funds are used to pay for disability-related expenses, and enable individuals receiving government benefits based on financial need, like SSI and Medicaid, to have more funds at their disposal to pay for certain expenses, including housing. However, ABLE accounts only can be owned and managed for individuals who meet the federal government’s definition of “disability” and only if the person’s disability arose before age 26. Please also note that there will be an increase in the ABLE account age from age 26 to age 46 which goes into effect in 2026.
The age limit is one of several ways in which ABLE accounts differ from third-party special needs trusts, which often are used to hold lifetime gifts or an inheritance set aside for a child with disabilities. For instance, unlike a third-party special needs trust which can own a home, vehicle or stock, ABLE accounts only can hold cash assets. Similarly, while there are no limits on the total value of assets that can be held by a third-party special needs trust, there are strict limits on how much money can be contributed to an ABLE account on an annual basis ($17,000 per year (in 2023) from all sources) and the total value that can be held in an ABLE account (the maximum is tied to the 529 education plan limit for the hosting state’s ABLE program). Additionally, an exception currently exists to permit some beneficiaries of ABLE accounts, e.g., those who are employed, to make further annual contributions up to the federal poverty limit ($14,580 in 2023) if the beneficiary is not contributing to defined tax-deferred retirement plans or annuities. One important consideration is that if there are any funds remaining in an ABLE account when the account owner dies, those funds first will be used to reimburse those states that provided Medicaid assistance to the owner; in contrast, there is no Medicaid reimbursement requirement for a third-party special needs trust.
Because ABLE accounts are owned by the person with disabilities personally, they can offer a means of maximizing the financial independence for those individuals with the ability to manage their own finances. Given the complementary nature of ABLE accounts and special needs trusts, parents may wish to consider opening and funding an ABLE account for a child whose disability arises before age 26, while still creating a third-party special needs trust to hold other inheritance assets long term.
Although New Hampshire did not establish its own Qualified ABLE Program, New Hampshire has partnered with the State of Ohio to offer ABLE accounts for New Hampshire residents under a program called STABLE NH. These accounts will be managed by Ohio’s STABLE program, which offers ABLE accounts to individuals with disabilities nationwide. Although New Hampshire residents have been able to enroll in other state ABLE programs accepting out-of-state participants, now that STABLE NH has launched, New Hampshire residents will be eligible to open STABLE NH accounts at discounted rates. Updates on this New Hampshire program will be posted by the New Hampshire Governor’s Commission on Disability at https://www.nh.gov/disability/. For general information regarding ABLE programs, see http://www.ablenrc.org/ and http://www.thearc.org/what-we-do/public-policy/issues/able-program-implementation.