People Should Expect Smaller Inheritances in the Future

According to a recent estate planning survey conducted by HSBC, only 9 percent of individuals plan to save as much money as possible to leave to their descendants. This doesn't mean that they're unconcerned with younger generations, though--just that they're more inclined to give money in the form of a "living inheritance." 43 percent of U.S. retirees actually continue to provide regular financial support to at least one other person, with 10 percent of those dependents being adult children. 

One commentator has pointed out that retirees aren't planning to spend the money on themselves. Instead, they want to "live and experience the results of their legacy planning, be it with their children, grandchildren, or others." They are also concerned with losing money to estate taxes. 

Individuals seem to be unaware of this trend, though, with 29 percent of those surveyed expecting their inheritance to fully or partially fund their retirement. Additionally, 59 percent of working-age Americans plan to leave a legacy for their children, but less than a third actually report receiving one. 

The takeaway from the survey is that individuals should not rely on an inheritance when financially planning for their own retirement.

New Legislation Allows Disabled Individuals to Save Money in Tax-Free Accounts

In December of 2014, Congress passed and President Obama signed a law called the Achieving a Better Life Act (ABLE), which went into effect in 2015. This piece of legislation allows individuals with disabilities to set aside money in a tax-free account to be used towards their long-term disability expenses. The account's benefit is that it allows for tax-free growth for savings and tax-free distributions when funds are used towards disability expenses. 

So long as the money in this account does not exceed $100,000, it does not jeopardize Medicaid or other federal benefits, like SSDI payments. 

In order to qualify to set up an account, one must be entitled to benefits based on blindness or disability under one of two titles of the Social Security Act and the blindness or disability must have occurred before the age of twenty-six. Alternatively, an individual can apply for a "disability certification" verifying that he or she has a "medically determinable physical or mental impairment(s) which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months" or is blind and that the blindness or disability occurred before the age of twenty-six. 

An ABLE account can only be used for qualified disability expenses. These include but are not limited to: education, housing, transportation, health, and prevention and wellness. 

There are some limitations to ABLE that are worth mentioning. For example, earnings from the account that are not used on disability expenses are treated as income, in addition to a ten percent tax penalty. Nonetheless, this legislation is still considered a big step forward for disability advocates.