PFS Special Education Support 2 — Questions and Answers
Question 1: An ABLE account for a disabled beneficiary may hold a maximum lifetime contribution of:
- $100,000
- $200,000
- The state 529 plan limit (Correct answer)
- $500,000
Correct answer: The state 529 plan limit
ABLE account lifetime contribution limits mirror the state's 529 plan limit, which varies by state but is typically over $300,000.
Question 2: Which federal law requires schools to provide a Free Appropriate Public Education (FAPE) to students with disabilities?
- Section 504 of the Rehabilitation Act
- The Americans with Disabilities Act
- The Individuals with Disabilities Education Act (IDEA) (Correct answer)
- The Fair Housing Act
Correct answer: The Individuals with Disabilities Education Act (IDEA)
IDEA mandates that eligible children with disabilities receive a Free Appropriate Public Education in the least restrictive environment.
Question 3: A parent sets up a special needs trust funded with $500,000. To preserve Medicaid eligibility, the trust must be structured as a:
- Revocable living trust
- Third-party special needs trust (Correct answer)
- Qualified disability trust
- Charitable remainder trust
Correct answer: Third-party special needs trust
A third-party special needs trust holds assets contributed by someone other than the beneficiary and does not trigger Medicaid payback requirements.
Question 4: Under Social Security rules, an individual on SSI who receives a cash gift of $2,000 would most likely:
- Lose SSI eligibility permanently
- Face no impact if gifts are under $3,000
- Have SSI benefits reduced dollar-for-dollar after the $20 exclusion (Correct answer)
- Be required to report the gift within 30 days only
Correct answer: Have SSI benefits reduced dollar-for-dollar after the $20 exclusion
SSI counts unearned income (like cash gifts) against benefits, with only a $20 general exclusion, reducing benefits dollar-for-dollar above that.
Question 5: A Qualified Disability Trust (QDT) differs from a standard complex trust in that it:
- Is exempt from all federal income taxes
- May claim the full personal exemption amount available to individuals (Correct answer)
- Allows tax-free distributions to the beneficiary
- Must be established before age 18
Correct answer: May claim the full personal exemption amount available to individuals
A QDT may use the full individual exemption amount ($4,700 indexed) rather than the $300 complex trust exemption, reducing taxable income.
Question 6: When a child with a disability turns 18, what critical legal step should parents take to continue managing their child's financial affairs?
- File for joint tenancy on all accounts
- Obtain legal guardianship or a durable power of attorney (Correct answer)
- Simply remain as custodian on UTMA accounts
- Convert all accounts to payable-on-death designations
Correct answer: Obtain legal guardianship or a durable power of attorney
At age 18, the child legally becomes an adult, so parents must obtain guardianship or a durable POA to continue making financial and medical decisions.
Question 7: Which of the following expenses is NOT a qualified disability expense under ABLE account rules?
- Assistive technology
- Health and wellness costs
- Education and training
- Vacation travel unrelated to disability needs (Correct answer)
Correct answer: Vacation travel unrelated to disability needs
ABLE qualified disability expenses must relate to the disability; purely recreational vacation travel unrelated to disability needs does not qualify.
PFS Special Education Support 2
An ABLE account for a disabled beneficiary may hold a maximum lifetime contribution of: