529A Accounts for Special Needs Individuals

Presented by Mark Phillips

As part of its 2014 year-end tax legislation activity, Congress passed the Achieving a Better Life Experience (ABLE) Act, which creates tax-favored accounts for individuals with disabilities.
Beginning in 2015, states will be allowed to adopt an ABLE program that mirrors many of the qualities of a traditional 529 plan. These “529A” accounts are intended to be a low-cost alternative to the establishment of special needs trusts.

About the new 529A account
Individuals with disabilities (or more likely, their parents or guardians) will be able to open one 529A account. To qualify, the beneficiary (the disabled individual)  must have a significant disability that he or she was diagnosed with prior to reaching age 26, and that disability must be expected to last for at least 12 consecutive months.

 

Contributions:

• Contributions are limited to $14,000 per individual, per year.
• Contributions are ineligible for the five-year-averaging rules available to standard 529 college savings plans.
• Unlike contributions to traditional 529 plans, contributions to 529A accounts are irrevocable.

 

Distributions:

• Qualified distributions may be taken over the beneficiary’s lifetime to cover the costs of medical expenses, education, transportation, employment training and support, and housing.
• Nonqualified distributions will be subject to income tax on earnings, as well as a 10-percent penalty.

Additional features:

• These accounts typically will not disqualify the disabled individual from most state or federal aid, such as Medicaid or social security.
• Only the first $100,000 in the account is exempt from the Supplemental Social Security Income limit of $2,000, however.
• Funds remaining in the account when the disabled individual passes away will be used to repay the state for any benefits received under a state Medicaid plan.
• Also to be determined is what will happen to any remainderment assets in the account not claimed by the state.

Other changes from the ABLE Act
In addition to the establishment of 529A accounts, the ABLE Act will allow traditional 529 plan owners to make twice-annual investment changes, rather than just one as has been the case historically. This change will apply to both 529 and 529A accounts beginning in 2015.

Although the legislation has been officially signed into law, the Department of the Treasury and the IRS have been given six months to develop regulations for these accounts. Additionally, states will need to implement their individual plans. As such, 529A accounts will likely be unavailable until the latter half of 2015, but they may certainly become an integral part of financial planning for some families with special needs children in the future.
 
This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

For Registered Representatives: Mark Phillips is a financial consultant located at Mark Phillips & Associates, 19171 MacArthur Boulevard, Suite 225, Irvine, CA 92612.  He offers securities as a Registered Representative of Commonwealth Financial Network®, Member FINRA/SIPC. He can be reached at (949) 333-6394 or at mark@phillipswealthmanagement.com.
 
© 2015 Commonwealth Financial Network®

What Happens When There is No Money Left?

Presented by Mark Phillips

Money is not the root cause of any degree of happiness we may enjoy, and yet having some sure can help make many of the challenges of life less annoying if we know how best to use it. That acknowledged, what does broke look like?

For so many in America who lived longer than they thought they would or planned for, who faced bigger challenges later in life than they imagined, or who in one way or another found themselves with no more cash until the next Social Security check arrives, life can be very restricted, solitary, and even humiliating.

One account I found most poignantly told is that of William McPherson as it appeared in The Week recently.

Click to read: When your money is all gone

Excerpted from an article that appeared in the fall 2014 issue of The Hedgehog Review, published by the University of Virginia

The 5 Keys to Wealth?

Presented by Mark Phillips

A recent article on Marketwatch provides a summary of some not so surprising yet compelling behavioral keys to financial independence…

Will you be rich, or will you struggle financially? How you answer five simple questions today may reveal the answer.

According to research released this month by the Federal Reserve Bank of St. Louis, “five simple questions may predict personal financial health and wealth surprisingly well.” Researchers William Emmons and Bryan Noeth, looking at data from 1992 - 2013 found that there was a strong correlation between how 38,385 different families scored on these questions and their net worth today – as well as a correlation with how likely they were to be financially comfortable in the future.

Click here to go to the article

Student Loans: How much can the student borrow?

Presented by Mark Phillips

From the Federal Government Student Aid web site

(click here to access the website)

Your school determines the loan type(s), if any, and the actual loan amount you are eligible to receive each academic year. However, there are limits on the amount in subsidized and unsubsidized loans that you may be eligible to receive each academic year (annual loan limits) and the total amounts that you may borrow for undergraduate and graduate study (aggregate loan limits). The actual loan amount you are eligible to receive each academic year may be less than the annual loan limit. These limits vary depending on

     ·  what year you are in school and

·  whether you are a dependent or independent student.

If you are a dependent student whose parents are ineligible for a Direct PLUS Loan, you may be able to receive additional Direct Unsubsidized Loan funds.

If the total loan amount you receive over the course of your education reaches the aggregate loan limit, you are not eligible to receive additional loans. However, if you repay some of your loans to bring your outstanding loan debt below the aggregate loan limit, you could then borrow again, up to the amount of your remaining eligibility under the aggregate loan limit.

The following chart shows the annual and aggregate limits for subsidized and unsubsidized loans.

Year	Dependent Students (except students whose parents are unable to obtain PLUS Loans)	Independent Students (and dependent undergraduate students whose parents are unable to obtain PLUS Loans)
First-Year Undergraduate Annual Loan Limit	$5,500—No more than $3,500 of this amount may be in subsidized loans.	$9,500—No more than $3,500 of this amount may be in subsidized loans.
Second-Year Undergraduate Annual Loan Limit	$6,500—No more than $4,500 of this amount may be in subsidized loans.	$10,500—No more than $4,500 of this amount may be in subsidized loans.
Third-Year and Beyond Undergraduate Annual Loan Limit	$7,500—No more than $5,500 of this amount may be in subsidized loans.	$12,500—No more than $5,500 of this amount may be in subsidized loans.
Graduate or Professional Students Annual Loan Limit	Not Applicable (all graduate and professional students are considered independent)	$20,500 (unsubsidized only)
Subsidized and Unsubsidized Aggregate Loan Limit	$31,000—No more than $23,000 of this amount may be in subsidized loans.	$57,500 for undergraduates—No more than $23,000 of this amount may be in subsidized loans. $138,500 for graduate or professional students—No more than $65,500 of this amount may be in subsidized loans. The graduate aggregate limit includes all federal loans received for undergraduate study.

Notes:

·       The aggregate loan limits include any Subsidized Federal Stafford Loans or Unsubsidized Federal Stafford Loans you may have previously received under the Federal Family Education Loan (FFEL) Program. As a result of legislation that took effect July 1, 2010, no further loans are being made under the FFEL Program.

·       Effective for periods of enrollment beginning on or after July 1, 2012, graduate and professional students are no longer eligible to receive Direct Subsidized Loans. The $65,500 subsidized aggregate loan limit for graduate or professional students includes subsidized loans that a graduate or professional student may have received for periods of enrollment that began before July 1, 2012, or for prior undergraduate study.

Graduate and professional students enrolled in certain health profession programs may receive additional Direct Unsubsidized Loan amounts each academic year beyond those shown above. For these students, there is also a higher aggregate limit on Direct Unsubsidized Loans. If you are enrolled in a health profession program, talk to the financial aid office at your school for information about annual and aggregate limits.

 

Understanding Your Credit Report and Score

Presented by Mark Phillips

How much do you know about your credit?

If you haven't checked your credit report or score lately, say in the past 12 months or less, it may be time to give them a look, especially if you have a major purchase or life change on the horizon. A bad credit report or score could mean you face higher interest rates—or cost you a loan, a job, or an apartment—so it's important to understand what's in your credit report and how to improve your score. Reviewing your credit information is also a good way to identify signs of identity theft.

Order a copy of your report. At your request, each of the three nationwide credit reporting agencies—Equifax, Experian, and TransUnion—is required by law to provide you with a free copy of your credit report once every 12 months. The credit reporting companies have set up a central website, www.annualcreditreport.com, where you can access your credit report immediately.

Read More and take action…