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| Helena S. Mock, Esq. |
In 2014, the ABLE (“Achieving a
Better Life Experience”) Act was signed into law. The law is aimed at providing a way in which those
with special needs can save money without losing needs-based public benefits
such as SSI or Medicaid. While an ABLE
account does not replace other options such as special needs trusts, it is a
tool that adds an option for us in serving our clients with special needs.
The ABLE Act is a federal law that
allows states to establish a savings program for persons with
disabilities. The program is modeled
after the 529 college savings accounts.
ABLE accounts may be used to accumulate savings for use by a disabled
beneficiary. The Act provides a comprehensive
list of what the funds may be used for such as education, housing,
transportation, employment training and support, assistive technology and
personal support services, health, prevention and wellness, financial
management and administrative services, legal fees, expenses for oversight and
monitoring, and funeral and burial expenses.
Any growth in an ABLE account will not be subject to income tax so long
as used for permissible expenditures.
An ABLE account may be established by
anyone including a parent, friend, family member or the disabled person him or
herself. The eligible beneficiary of the
account must be an individual who meets the standard for disability prior to
turning the age of 26. A recipient of
SSI or SSDI would automatically meet the disability requirement, but those who
do not receive such benefits must be certified as disabled under the Act.
While the ABLE Act has made strides
in bringing to light the issue of saving for those with disabilities, there are
some limits. For example, the annual
contribution limit is equal to the annual gift-tax exclusion amount (currently
$14,000). In addition, SSI exempts only
the first $100,000 of an ABLE account.
Therefore, if an individual receives SSI, his or her ABLE account may
not exceed $100,000; otherwise, the individual will become ineligible to
continue receiving SSI, but can remain eligible for Medicaid.
The ABLE account is also a “Medicaid
Payback” account. This means that upon
the death of the beneficiary, Medicaid payments made on behalf of the
beneficiary subsequent to the establishment of the ABLE account must be
reimbursed from any funds remaining in the account.
The ABLE account will not be useful
for people who have become disabled due to an accident and who are receiving a
judgment or settlement for a significant amount. And, it doesn’t work for a person with
special needs who is receiving a large inheritance. There are several other instances where an
ABLE account is not the answer, and therefore you should consult a qualified
special needs planning attorney to discuss all available options and the
benefits and limitations of each option to determine what would be best for
your individual situation.
