As with federal and Illinois tax and trust law, recent law changes related to supplemental needs planning have been modest but important.
The Social Security Administration (the “SSA”) recently finalized rules that remove food from the calculation of in-kind support and maintenance (“ISM”). Although the ISM rules remain complicated, in general, the removal of food from the ISM calculation enables individuals who receive supplemental security income (“SSI”) to have food paid for by another person or by a supplemental needs trust without reducing their monthly SSI payments. The new rules will be effective September 30, 2024.
Similarly, the SSA is anticipated to soon finalize a proposed rule regarding rent. Currently, shelter is includable in the ISM calculation if provided or paid for by a third party, such as if an SSI recipient lives rent-free in a parent’s home or a supplemental needs trust pays their rent. As of September 30, 2024, the new rule will provide that as long as the SSI recipient has a written lease indicating a rental amount at least equal to the “Presumed Maximum Value” ($334.33 per month for 2024), the SSA cannot charge the recipient any additional amount of food and shelter deductions. In other words, if an SSI recipient pays $400 in rent to a parent with whom they reside based on a written lease, the recipient’s SSI check will not be reduced by ISM even if the fair market value of the rental exceeds $400.
Under the SECURE Act, if an IRA participant names as an IRA beneficiary a properly-structured supplemental needs trust for an individual with a qualifying disability, that trust may receive the maximum deferral treatment (over the individual’s life expectancy) for IRA distributions. The subsequent SECURE Act 2.0 legislation confirmed that treatment will apply even if the supplemental needs trust includes one or more charitable beneficiaries at the death of the primary beneficiary.
The ABLE Age Adjustment Act increased the disability onset age for ABLE account eligibility. Under the original ABLE legislation, an individual’s disability must have started before age 26 (the “onset age”) for that individual to be eligible for a tax-advantaged ABLE account to pay for disability-related expenses. Under the new rules, which will be effective beginning on January 1, 2026, the onset age will increase from 26 to 46, allowing many more individuals with disabilities to benefit from ABLE accounts.
Finally, in Illinois, the asset limit for Medicaid eligibility increased from $2,000 for individuals and $3,000 for couples to $17,500 for individuals and couples, a long-awaited change.
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