Special needs trusts and the ABLE Act

One of the families from our local group has a little boy about Kamdyn's age, and the dad works for Morgan Stanley as a financial advisor.  In order to plan for his own family, he took it upon himself to find out about special needs trusts and the ABLE Act, and thankfully, pass it on to our group.
First of all:

* A person with a disability is eligible for Medical Assistance/ Medicare (it's called different things in different areas) and Social Security Income.  In Pennsylvania, a diagnosis alone qualifies a person for the medical insurance(This is also different depending on what state you are from).  Social Security Income, however, is based on the income in the household. 

* When an individual with a disability is receiving Social Security Income, they (including their parents) cannot have more than $2,000 available to them or the Social Security will end.  The $2,000 includes everything from bank accounts, savings bonds, stocks, life insurance policies, anything that can have a cash value. (note: There are life insurance policies that do not have a cash value and would not affect the eligibility for Social Security) 

The ABLE Act:

* The ABLE Act is meant to solve the dilemma of not being able to have more than $2,000 and keep the benefits available for the person with the disability.  This will make it possible for the individual with a disability to have a savings account, save for college, a car, a house payment, or whatever else they may need/want and still receive Social Security and their government medical insurance. 

*  The ABLE Act will allow the individual with a disability to easily walk into a bank and open up an ABLE  529 account, similar to the standard 529 account.

* The money in the account can pay for almost anything.  The money in the account is tax exempt and grows over time.

*  Our friend from Morgan Stanley, however, told us that the ABLE 529 account is not a replacement for having a special needs trust.  This account is meant for more short terms needs, not future planning for when the parents are gone. 

* Another thing our friend informed us of is that if the ABLE Account beneficiary passes away, the state will have the legal right to collect a "pay back" of any money they paid into the disabled person's medical care from the time the ABLE account was established.  Some people are asking for a revision to this part of the Act.

Special Needs Trust:

* It is good to have a special needs trust set up in the event that both of the individual's parents die.  The person with the disability is the beneficiary, and there is a Trustee set up to oversee the allocation of the trust. You can also set up another person to oversee the Trustee to make sure they are following the wishes of the parents.  This person could "fire" and reappoint another Trustee if they are not.

*  The trust can own anything:  money, land, house, car, other items.  This is the best way to leave inheritance to the person with the disability.  Money from the parents' life insurance can immediately go into the trust.   

*  The individual with a disability is able to maintain their lifestyle and quality of life, and the money in the trust does not count against their eligibility for Social Security or Medical Assistance.

*  You can set up the trust at any time.

* Our friend is currently pricing lawyers in our area.  So far, he found a lawyer that can set up the special needs trust for about $800.  So, if you are being told that it's going to cost $2,000 (because a lot of lawyers will say that) to set up the trust, keep calling around.  Price as many lawyers as you can.

If you have some knowledge about this, feel free to leave it in a comment.  If most people are like me, they are intimidated by all of this.  But it's good to get some understanding of it, especially when it's in "normal" people language.