ABLE Accounts and Special Needs Children receiving child support after aging out.

By Travis Clark, Esq.

Parents who contend with the issues presented when a child has special needs, are Heroes.  Many parents and families who care for a sibling or child with special needs face a multitude of pitfalls, and legal traps.  This article seeks to shed light on the issue of child support which is ordered after the child reaches the age of 18.

Under Nevada Law, NRS 125B.110, parents of children with special needs may petition the court with jurisdiction over the child, for child support to continue past the date they reach the age of majority.

When a disabled child becomes an adult, he or she usually qualifies to apply for Social Security Disability Income (“SSDI”) and Medicaid.  These Federal Benefits are calculated to the individual based on their “income” or “resources” which must be less than $2,000 in a calendar year! 42 U.S.C. § 1382(a)(1)(B) and (a)(3)(B).  What counts as income or a resource is defined in 42 U.S.C. §§ 1382a and 1382b.  Interestingly, 1382b does not state what a resource is, it states what a resource is not.  It is not a model of clarity.

In the case where a parent or guardian moves for child support to extend past the age of 18, we have an issue where federal benefits may, or most likely will, be reduced based on the support obligation issued by a State court.

How do we fix this?  The first and most widely known remedy is a first person, special needs trust, that qualifies under 42 U.S.C. § 1396p(d)(4)(A); these trusts, at least in Washoe County, are usually drafted by the Guardianship Court, or an officer of the Court, and requires that the trust pay back Medicaid upon the death of the beneficiary of the trust.  With this conduit, child support can be paid to the trust and are not counted as a resource for the individual such that their federal benefits will be reduced.

The second, lesser known option is to open an ABLE account.  ABLE stands for Achieving a Better Life Experience.  These tax-advantaged savings accounts came into being with the 2014 ABLE Act.  They are still relatively new vehicles for the protection of resources for disabled individuals.  Relatively few practitioners know of their existence or utilize this viable tool.

ABLE accounts in Nevada can be researched at: ABLE Nevada, or https://savewithable.com/nv/home.html.  The benefit of these accounts is multifaceted in that they are relatively easy to set up, provide tax advantages and are easy to maintain.

Tax advantages include tax-deferred and tax-free status on investments, if they are used for qualified disability expenses.  Qualified expenses can be discussed with a local agent, or found on their website.   Non-qualifying expenses may be subject to taxes and penalties.

Accounts can be opened with as little as $25, but accounts have a cap of $100,000.00.  If the amount in the account exceeds $100,000.00, SSDI will be suspended until the amount is reduced.  Each individual is limited to one account.   Those who wish to contribute to the account may do so, however, contributions are limited to $15,000 annually in the aggregate, with some exceptions for earned income versus unearned income.

There are other fees which apply, however, the use of an ABLE account is an easier way for families to plan and assist their special needs children who reach adulthood.

If you or your family members are in such a circumstance, please consult a professional to assist you with working through the issues of child support as it extends past the age of majority.  Maximizing the Federal benefits, which are minimal each month, while providing additional resources for your loved one is essential to provide and maintain a quality life for those in need.

Kimberly Surratt served for eight years on the executive council and has been the vice chair and then chair of the State Bar of Nevada Family Law Section. In addition, she is the President-Elect of the Nevada Justice Association and the chair of the domestic lobbying committee. She has lobbied with the Nevada Justice Association since 2004.

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