Month: January 2021

Sixty-one million adults and over 12.6 million children in the United States have some type of disability. 

If you have a disabled or blind child or other family member, or are disabled or blind yourself, you should know about ABLE accounts. These tax-advantaged accounts can be a real game changer for the disabled.

Ordinarily, a disabled person who receives government benefits can only have $2,000 in cash or other countable assets. This can make it impossible for disabled people to save money for emergencies, to buy a house or car, or take a vacation.

This is where ABLE accounts come in. Contributions to ABLE accounts up to certain levels are not counted for purposes of means-tested programs for the blind and disabled. Disabled people can have up to $100,000 in an ABLE account without losing Social Security disability benefits.

Contributions to ABLE accounts are not deductible for federal taxes, but the money in the account grows tax-free. Withdrawals are also tax-free if made for a variety of living and disability-related expenses.

Up to $15,000 in total can be contributed to an ABLE account each year. Contributions can come from the disabled beneficiary, from family, and from friends. Disabled people who work can put in an additional amount limited to the lesser of their compensation or $12,490 in 2021.

A total amount of $300,000 to $500,000 can be deposited into an ABLE account, depending on the state.

There is only one real drawback to ABLE accounts: they are only available for people who became blind or disabled before reaching age 26. This eliminates the majority of the disabled.

ABLE accounts are run by the states. Forty-two states and the District of Columbia have them. You don’t have to set up an account in the state where you live, and it can pay to shop around.

By the way, if you have a special needs trust, you can keep it. An ABLE account can be set up in addition to a special needs trust.

If you have any questions or need my assistance, please call me on my direct line at 408.778.9651.

• By Leon Clinton
• January 20, 2021

If you become an executor of your loved one’s estate, you may have some important tax decisions to make. Here are some quick thoughts.

The decedent’s medical expenses provide you with planning opportunities to

• deduct as itemized deductions (subject to the 7.5 percent floor) not only the medical expenses incurred during the taxable year of death, but also those unpaid at the date of death but paid within one year of death; or 
• deduct in full (no floor) the medical expenses paid after the date of death against the federal estate tax.

You, as the executor, may need to file

• the decedent’s final Form 1040,
• the estate’s Form 1041 income tax return, and
• the estate’s Form 706.

You won’t need to file Form 1041 when all the decedent’s income-producing assets bypass probate and go straight to the surviving spouse or other heirs by contract or by operation of law—assets such as

• real property that is owned by joint tenants with right of survivorship, 
• qualified retirement plan accounts and IRAs that have designated account beneficiaries, and 
• life insurance death benefits that are paid directly to designated policy beneficiaries. 

If the estate is valued at $11.58 million or less and the decedent did not make any sizable gifts before death, you don’t have to file Form 706. But even if you don’t have to file Form 706, you may want to file it anyway to preserve the portability election.

If you have questions on this process, please call me on my direct line at 408.778.9651.

• By Leon Clinton
• January 15, 2021

• By Leon Clinton
• January 12, 2021