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From the Financial Hotline

Call, fax or e-mail for answers to all your financial questions.

Date: 2/1/2017

Author: Financial Hotline


Q: What is the difference between a Special Needs Trust and an ABLE account?

A: In general, prior to 2015, a Special Needs Trust was the choice for those wishing to set up accounts for disabled individuals. ABLE accounts are a new option to establish tax-free savings accounts that will not affect the ability to qualify for, or remain on, government assistance. Here are some key differences between the two:

An ABLE account allows a person with disabilities to set up his own account with his own money instead of relying on a parent, grandparent or court to establish a first-party special needs trust for him. However, accounts can only be established for the benefit of people who developed their disabilities before turning 26 years old. By contrast, if a special needs trust is established with funds from the trust beneficiary, it does not matter when the person developed the disability.

A person with disabilities can manage the funds in their own ABLE account, making the person less reliant on others for assistance. If a special needs trust was utilized to hold the funds instead, a trustee has a legal obligation to safeguard the funds.

Funds in ABLE accounts grow tax-free and are not subject to gift tax restrictions. Contributions to ABLE accounts are limited to $14,000 per year and can hold up to $100,000 without hurting a Supplemental Security Income (SSI) beneficiary’s eligibility, whereas Special Needs Trusts gains are taxed but there is no limit on contributions.

Most importantly, if there are funds remaining in an ABLE account upon the death of the account beneficiary, they must be first used to reimburse the government for Medicaid benefits received by the beneficiary, and then the remaining funds must pass through probate to be transferred to the beneficiary’s heirs. If a special needs trust is used, there will be no probate and there will be no Medicaid payback.

Q: I want to sell my vacation home and purchase another. Can I utilize the 1031 Exchange?


A: The answer is “yes” if the dwelling meets the qualifications set forth in Revenue Procedure 2008-16. Effective March 10, 2008. Review the following to see if your transactions qualify:

Relinquished property

• The holding period for the vacation home is at least 24 months immediately before the date of the exchange

• For each of the two-12-month periods, the vacation home is rented to another person at a fair rental for 14 days or more

• The homeowner limits his use of the vacation home to not more than 14 days or 10% of the number of days during the 12-month period that the vacation home is rented at a fair rental value.

Replacement property

• The holding period following the exchange is at least 24 months

• For each of the two-12-month periods, the vacation home is rented to another person at a fair rental for 14 days or more; and

• The homeowner limits his use of the vacation home to not more than 14 days or 10% of the number of days during the 12-month period that the vacation home is rented at a fair rental value.

Q: What is the basic for when I can file for Social Security?

A: You can claim Social Security benefits as early as age 62 but this option means you will receive reduced benefits for your entire lifetime (25% less) If you wait until your full retirement age (currently 66 for people born from 1943 to 1954 you will receive your full benefit each month. But if you wait until age 70, you will earn delayed retirement credits that raise your benefit 8% per year.

You can begin benefits at any point between 62 and 70, with the amount of your full benefit marked down by a proportional amount if you’re younger than full retirement age and marked up if you’re older.

Q: How can I check the status of my tax refund?

A: You can check online at www.IRS.gov/refunds or download the IRS2Go mobile app for your phone. You should call only if its been 21 days since you filed electronically or 6 weeks if you filed by mail.

Individuals: 800-829-1040
Businesses: 800-829-4933

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