Working Together: ABLE Accounts & Special Needs Trusts with Matt Syverson

What's most important to you when it comes to choosing your financial advisor? Someone who's aligned with your biblical values. How about someone who will take the time to explain your options? Certified Kingdom Advisors are professionals who meet high standards in competence and integrity and have been trained to offer biblical financial advice.

To find a Certified Kingdom Advisor in your area, visit faithfi.com and click Find a CKA. The definition of synergy is two things put together, having an effect greater than the sum of the parts. Hi, I'm Rob West. Synergy can play a beneficial role in family finances. The case in point is an ABLE account, working together with a special needs trust for a person with disabilities. Matt Severson joins us today to talk about it, and then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is Faith and Finance, biblical wisdom for your financial decisions. Well, our guest today is Matt Severson. Matt is a Certified Financial Planner and Certified Kingdom Advisor in Overland Park, Kansas. He's also well versed in helping families who have children with special needs make the most of their financial options. Matt, this is an important topic, and we're grateful to have you back to talk about it. So great to be back with you on Faith by Rob and looking forward to today's discussion.

It's near and dear to my heart, so happy to be here. I know it is, and Matt, we're discussing, as we've said, how an ABLE account can work with a special needs trust. Let's look at each one individually to start with. So why don't we begin with the ABLE account? Why would a family want to set one up?

Yeah, good question. So the ABLE account is only about 10 years old, so some of your listeners may not even heard about it yet, but it's available for people with special needs that are either on SSI or Medicaid, have an asset limit restriction, but still want the ability to work. So the ABLE account allows folks to work and save for themselves rather than being limited to the government restrictions. Supplemental security income is only about 943 bucks a month, and you can't have any more than $2,000 of assets to your name.

So I mean, imagine any one of us on the call trying to live on 943 a month and have no more than 2,000 of assets, that's very difficult to do. The ABLE account expands the ability for folks to work and save and manage their money. Yeah, that's really helpful and I think an important tool for those families caring for a child with disabilities. Now, how does a special needs trust work and perhaps how are they different? Yeah, so special needs trusts have been around for over 30 years, so much longer track record for them. Those are also designed to store dollars for the person with special needs that won't short circuit their government benefits. The nice thing about special needs trusts is you're allowed to hold all kinds of different assets from cash to investments to houses and cars and IRAs and Roth IRAs, where ABLE accounts can only receive cash in and can only send cash out.

That's a very big distinction between the two. But we need both of them to work together during the lifetime of the person. Yeah, and obviously the special needs trust, more complexity, that means probably a little more involved in setting it up and therefore a bit more cost, right? Yeah, so there's some cost for the attorney to put it together for you, no doubt about it, but we want that done correctly and done right the first time. But once the special needs trust is built, then it's up to you and or the trustee and possibly the investment advisor to keep that going for the person with special needs over time. That account could be anywhere from tens of thousands to hundreds of thousands to into the seven figures, depending on what the family left behind for the person with special needs. Or the ABLE account, it can't go past $100,000 at any one time. Yeah, so at the end of the day, the objectives are the same for an ABLE account and a special needs trust.

We're going to talk after the break about how combining them is really helpful and can be beneficial to a family. But Matt, at the core of both of these is the idea that we want to set funds aside for the benefit of the special needs child, even through adulthood, but not preventing them from getting government assistance, correct? That's absolutely it. That is what you're trying to do. The phrase is called, we're trying to supplement their needs, not supplant the government benefits.

You'll see that phrase in your special needs trust. That's the point. And these are both time tested and true over time that they work great.

We just got to set them up properly and use them well. Yeah. And interestingly, that ABLE account is actually built on the 529 chassis, isn't it? That's correct. That's correct. It's kind of a sister account to those college savings 529 plans.

Yeah, which is very simple to set up. Well, Matt Severson is with us today. He's a certified financial planner and a certified kingdom advisor.

And we're talking specifically about helping families who have children with special needs and how these two great tools can work together, somewhat of a specialized topic, but a really important one. We'll be back with more from Matt in just a moment. And after his interview, your questions at 800-525-7000.

Stick around. What's most important to you when it comes to choosing your financial advisor? Someone who's aligned with your biblical values? How about someone who will take the time to explain your options? Certified kingdom advisors are professionals who meet high standards in competence and integrity and have been trained to offer biblical financial advice.

To find a certified kingdom advisor in your area, visit faithfi.com and click Find a CKA. Faith and Finance is grateful for support from Sound Mind Investing. For more than 30 years, they've offered financial wisdom for living well.

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With me today, my good friend, Matt Severson. Matt is a certified financial planner and a certified kingdom advisor in Overland Park, Kansas. He's also well-versed in helping families who have children with special needs. And today we're talking about two powerful tools that you can use to save for a child with special needs, both as an adolescent child as well as an adult, but not preventing them from receiving government assistance. We've mentioned before the break, Matt, an ABLE account, which is kind of newer on the scene, as well as a special needs trust. In a moment, we're going to talk about how these two things can work together in a complementary way. But let's unpack the features of each of them first, starting with that ABLE account.

Yeah. So some key features of the ABLE account go like this. First of all, you need to declare a permanent disability prior to the age of 26. It could be blindness. I have a daughter with Down syndrome. It could be autism.

There's a myriad of different disabilities that a child can either be born with or develop. One quick point is in January 1st of 2026, the age of onset is up to 46. I know there's a lot of numbers flying around, but right now it's 26.

In about a year, it's going to go to the age of 46. So it's going to make it available for many more people. The point of the ABLE, remember it stands for Achieving a Better Life Experience.

That's the acronym. For those that are ABLE to work, but they've had these asset restrictions and can't scroll away dollars, now the ABLE gives them that outlet to be able to do that. So they can make contributions up to the amount that they're earning that year, along with others can contribute to it as well on their behalf. Some states allow for a state tax deduction similar to that College Savings 529 plan. It's going to be a very similar deduction amount. And you can contribute to this over their lifetime up to the total maximum that 529 plans allow, which is usually in the hundreds of thousands over someone's lifetime. But a key distinction is you can't go past a $100,000 balance at any one time. If you do, we've seen how their Medicaid or their supplemental security income stops temporarily until you get that balance back down.

Okay. And then they let you keep going again. So it's not a permanent disconnection.

It's just a temporary. If that balance back under $100,000, then keep going. These ABLE accounts can pay for virtually anything for the person with disabilities, both as a minor as well as an adult. Importantly, they can cover food and rent, which in a moment we'll talk about special needs trusts are not supposed to cover that. There's some consequences to that. We talk about avoiding the vices with the ABLE. You shouldn't pay for cigarettes and alcohol and gambling tickets, things like that.

So don't do that. But all the other things that improve the person's life, go for it. But there's one last word of caution with the ABLE accounts based on your state. Is there something called a Medicaid clawback provision? Let's pretend your family member with disabilities has been under Medicaid for years and years and years, and then they passed away. There's potentially a bill yet to pay back to Medicaid if something happens to you. If there's a balance in the ABLE account and your state doesn't have a no clawback provision, it's possible that they're going to come asking for the balance to shore up that bill before the rest is released to the family. Now, in the state of Kansas, our legislature specifically not allowed the Medicaid clawback. So that's helped folks in Kansas settle down a little bit, I don't want to put all this money in here. And then if it's just going to go back to Medicaid, it's okay.

Because our state and others have taken care of that. Okay. So just a word of caution about that to be aware of in your state. Yeah, that's helpful.

All right. I know there's a fewer features with regard to the special needs trust, but anything we need to know about? Yeah, so the special needs trust is more open architecture in terms of you can hold any types of assets in there.

Someone else is probably setting it up for the person with disabilities. That's called a third party settled trust. There's attorneys involved, there's trustees involved. There's investment advisors involved. There's probably there could be separate tax returns involved.

But the good news about them is they you can hold just about anything you can think of within just like any other trust that we have here in the United States. And you can specifically designate who gets these resources when the person with disabilities passes away. So my wife and I, we have four children. Well, one of them has Down syndrome, the other three are typically developing children. So when we pass away, X amount is going into Lily's special needs trust. Yes, once she passes away, then it's clearly going to the next three children equally in equal distribution. Well, where the ABLE account you can't really say who it goes to next until Medicaid has had their shot at it before it gets to the family. So the special needs trust is much more protective to your family's estate plan on the back end of all this when the person passes away. Yeah, that's really helpful. Well, I think we're beginning to get a picture as we hear about some of the features of each of how they're going to be really powerful together.

So let's go there next. How can combining them work to a family's benefit? So the ABLE account is perfect for those day to day expenses, and especially if someone's able to work and scroll away dollars and save for the future, especially if they're bumping into a $2,000 asset limit, that's a great place to put the dollars.

And then they'll get a debit card and so they can literally go to the store, either by themselves or with their guardian or their helpers, and use the debit card at the store very simply. Whereas the special needs trust is more complicated, someone's got to make sure there's cash available to spend from the trust, there's more moving parts with the special needs trust that make it harder to deal with on a day to day basis, but certainly there for the person. The other thing to keep in mind is only cash can come in and out of the ABLE where you can literally transfer stock, you can transfer cars, houses, rental properties into special needs trust.

So it just makes it more flexible for what the family's resources are designed to do. But here's an important distinction on when to use the special needs trust for the ABLE. If someone's on supplemental security income at $9.43 a month, and SSI finds out that the special needs trust is paying for rent and food, which is an acceptable thing for the special needs trust to pay for, they'll actually say, oh, you don't need this much SSI. So we're actually going to reduce your monthly payment, because you have this nice big special needs trust over here. So this is a perfect place for the ABLE account to step in, handle rent, pay for food, whether you go into the convenience store or the grocery store that can easily handle the food needs of the person with special needs, where the special needs trust probably shouldn't do that. And the other concept is because now with the ABLE, we can work and save money from our earnings.

Even though as you make more and more income, if they're capable, your supplemental security income will decrease appropriately, because now you're working, so that's okay. But now we have a place to put those earnings up to about the mid 20,000s per year, depending on your earning potential. So just a great outlet for people to operate more typically, like others that are trying to work and save for the future. This gives them the ability to do that, where the special needs trust has the place to park the dollars and use the dollars, but not nearly as interactive in their day to day working life. Yeah, very good. So it's really critical to bring some planning to the table so you can look at this in light of your overall financial picture.

And that's where an advisor can help alongside an attorney. Well, Matt, we've covered a lot of ground today, so thankful for your time. We appreciate you stopping by. You're very welcome, Rob. Great to be here. And hope that everybody can achieve a better life experience with what we've talked about today.

Amen. That's Matt Severson, Certified Financial Planner and Certified Kingdom Advisor at Sound Stewardship, an independent financial planning firm in Overland Park, Kansas. You can learn more at soundstewardship.com.

That's soundstewardship.com. All right, your calls are next. The number 800-525-7000, that's 800-525-7000. And by the way, you can call that number 24 seven. You can also email us with your financial questions at askrobb at faithfi.com.

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We want to help you manage it wisely and faithfully over your lifetime. You can call today with your questions, your very specific financial questions at 800-525-7000. We've got some lines open today and we'd love to hear from you. Call right now, 800-525-7000. Let's go to Oklahoma and welcome Matthew to the broadcast. Go ahead, sir.

Hey, sir. Thank you so much for taking my call. I appreciate your insight and wisdom.

Thank you. My wife and I are debt-free with the exception of a small signature loan and we have the opportunity to purchase a maker of land and build a home using a VA loan and we were trying to figure out the best time to do that. We currently own eight acres beside it with a mobile and one of the options that we could do would be to purchase a mobile, a double-wide, but I don't like the longevity of that.

I think it'd be better to go ahead and build a metal shop home and I think it would just hold a lot more value over time, you know? Yes. And then we have six kids. So is that right? Is that the right way to think about that?

I think it certainly could be. I think the question is just your financial readiness for this expense and the project that we'll be ensuing. So are you planning to hire a general contractor or will you be the GC on this? Well, we can do either one.

I have a brother-in-law who does GC work, but I think I also have some friends who are in the trades and I have a background in the trades as well in the military. So I think we could pull it off over the summer. I'm a teacher as well, so I have summers off. Yeah, very good. I think we can make it work, you know?

Yeah, very good. And then in terms of how you would go about that, would you get a construction loan and do you have a portion of what it will ultimately take for the build already saved up or will you try to fund all of that from a VA loan? I think we talked about it and to answer your question, I think I was really loving the idea of staying out of debt completely, but this is a need my wife has and so this is not really, I can survive wherever, but I think this is more for her and for the kids and so it's been one of those things where my face has been stretched a little bit, but you know, looking back, the Lord's always provided, you know, we've ties and we believe in that. So I think we do a construction loan to a mortgage through it and use as a VA and we don't have to, when I talked to the bank recently, they said you don't have to worry, you know, about any money.

You just have to pay the interest payment every month until you get to the mortgage itself. Yes. Yeah, I think that's exactly right. I mean, to the first part of that, I think, yeah, you as a one flesh, as a married couple need to come together and just kind of think through that and think through your values. I heard you say her, you know, she has a priority on, you know, having a home and there's some security that comes with that and I certainly understand that. You're saying you want to be out of debt as quickly as possible and I think we need to kind of pray through how these two things come together, how do we kind of build on our value of having a homestead, a place that, you know, for your family as the kids grow that can be a part of your family story and that you can serve and bless others and provide for them and also kind of lean into this desire that you have to be debt free to the extent you can. And I think those things don't have to be mutually exclusive and it's going to involve you finding the right home to build and the right amount to borrow and then keeping your lifestyle at a minimum so you can pay that down as quick as you can. The VA does offer construction loans and so, you know, they can be a good option. You don't need to buy the land but to build the home and then, you know, pay it off all in one and so it doesn't require a down payment. I'd be careful there just because they allow you to go in without a down payment as a feature of the VA loan. I'm not necessarily a big fan of that because you'd have 100% financing there. They do have more relaxed credit guidelines, you know, there can be some exemptions to that VA funding fee, you may want to look into that and then it would obviously convert to a permanent loan once you're done and that saves in some of the closing costs when you do that. So I think that could be a great option for you guys. I would just think through what is that actual mortgage payment going to be when we're done based on the amount we're having to borrow and try to really dial into not just a best guess on what it's going to cost but really take the time especially if you're not using a general contractor who's going to give you, you know, a guaranteed bid. You just want to make sure that you're not being too conservative or I guess too aggressive in thinking that you can do it, you know, inexpensively and find out you're going to have cost overruns that end up, you know, with a much bigger mortgage than you intended, you know, that is now going to put a strain on the family budget. Does that make sense? Yes, sir.

Yes, sir. That was one of the reasons why we consider the mobile but I just don't like the mobile over, you know, over a regular home over time because I think the value, you know, decreases and so... Yeah, I would tend to agree with you on that. I think the key here is just do a detailed bid whether it's for yourself with your brother-in-law or hiring a contractor and make sure you get everything in there so you know what is the full cost of everything that's going to take to get to the finish line and then, you know, work that against your budget and make sure that you're not getting too, you know, stretched too thin.

A good guideline for that ultimate mortgage payment once you convert it to permanent would be no more than 25 at the most 30% of your take-home pay and that'll make sure that you have enough left for everything else. But I think you're on the right track here, Matthew and, you know, this is not for the faint of heart, new construction, however, I'm thrilled to hear you've got some experience yourself and in your family with, you know, pulling this off in a way that will ultimately be a blessing to you and your wife and your kids. So thanks for being on the program, sir. We appreciate you connecting with us today. 800-525-7000 is the number to call.

That's 800-525-7000. We do have some lines open today. By the way, when it comes to the housing market, we know that it's certainly been a challenging environment to say the least. I was just looking at some data over the weekend about the housing market and you may not realize this, but housing prices have increased by 42.4% since January of 2020 and median incomes have only risen by 23%. So we've got essentially housing prices two times that of the increases that we've seen in incomes, which just the net result of that is it's putting pressure and stress on the average family.

I think the latest data I'm seeing is that a household needs to earn somewhere around $105,000 to $120,000 a year to comfortably afford a house, which is dramatically up since pre-COVID. Now, some of the things that have led to these really high year-over-year increases in the housing market are working through the system. We're seeing a bit more in the way of new construction, which had slowed and that's why we were experiencing some of this with a lack of inventory. We have more inventory now, obviously lower interest rates will help, but that's just going to slow the rate of increase, not necessarily see any kind of decline.

So make sure you go into it well-repaired and don't buy a house you can't afford. Folks, so thankful for you and the opportunity to be able to come alongside you each day and hopefully be an encouragement to you, point you back to God's word and really point you toward God as your ultimate treasure. The opportunity we have to manage God's money is a big deal. We'll ultimately give an account for it someday and so we want to help you live as that wise and faithful steward. We'll gather together tomorrow to do it all over again. In the meantime, big thanks to my team today, Taylor Standridge, Pat Montague, Devin Patrick and all the team members here at Faithfi. We'll see you tomorrow. Faith in Finance is provided by Faith By and listeners like you.