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In my will, I have had a lawyer craft a special needs trust in case I predecease my disabled relative. Over the course of many years, there have been regular withdrawals from his checking account to keep it below the allowable $2000. These monies were given back to him for household expenses. Can the cumulative amount over the 5 year lookback be protected from being considered gifts and therefore subject to a penalty?

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Just last Friday, Pres. Obama signed the ABLE act. ABLE is Achieving a Better Life Experience. It will enable a person to save up to $100,000 in a special needs account with out risking Social Security or any other government program. The person may also keep any Medicaid benefits they are already receiving. They are fashioned after the pre paid tuition plan each state has. Google "Obama signs ABLE" and read up on it. It will of course go back to the states for fine tuning for each state as they see fit, but it's a good deal. I just received this information today. I was glad to be able to pass it on.
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If the checks were made out to you and there are no receipts to show where the money went, it is all a gift.
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Any transfer for less than fair market value will usually be considered a gift unless you can prove otherwise. If the transfer was to you or someone else and you gave the money back by paying his expenses you will typically have to show that in the form of a check or receipt. The $2000 resource limit only applies at the time a medicaid application is filed and approved. Is he receiving Medicaid benefits now? Income is not considered a resource until the month following receipt, why did you transfer the money instead of paying for his expenses directly from his income? If he is just applying for Medicaid disclose all the transfers and provide as much proof the money was used for his benefit otherwise stop making anymore transfers.
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RockinRobin - Doesnt ABLE limit use to those who have a disability prior to age 28? & limits the amount of $ to a max of 15K a year up to a max of 100K in lifetime that is outside of IRS taxing & outside of asset ceiling for SSDI?

If so, not of much use for elderly with dementia but great for those with a childhood or young adult onset disease or bad auto or sports accidents which leave them disabled.

ABLE will be especially good for those who currently have to deal with a special needs trust but would rather have the beneficiary self directing rather then having to go through trustees. I'm a cotrustee on a cousin who had polio in the 1950's SNT set up by his parents, so ABLE for him will be good as he can immediately shift 15K to the ABLE & he can use the $ directly. Less for the trust to do & we can probably move up the defund of the SNT.
Do you know if ABLE limits the # of accounts that can be opened?
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Igloo, There can only be one ABLE account. The max yearly is $14,000 (non taxable) and the age is 26.
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