A simple guide to the ABLE Act

In 2014, the Achieving a Better Life Experience (ABLE) Act was enacted, making it possible for people to contribute to tax-advantaged savings accounts established for the benefit of individuals with disabilities without jeopardizing public benefit eligibility. The funds from such accounts must be used for qualified disability expenses and are subject to a Medicaid payback upon the death of the individual for whom the account was established.

ABLE accounts promote the independence of people with special needs. Millions of people with disabilities rely on various public benefit programs, such as Supplemental Security Income (SSI) and Medicaid, to cover the cost of housing, food, health care and other expenses. However, these programs generally have strict income and asset limits, and usually do not cover an individual’s basic living expenses in their entirety. Now, for the first time, individuals can save money for qualified disability expenses without jeopardizing these important benefits.

To qualify for an ABLE account, an individual must have been disabled prior to reaching the age of 26. Such disability determination must meet the Social Security definition of disability. People who meet the onset date criterion and already receive SSI or SSDI are automatically eligible to open accounts. Individuals who do not receive benefits will need to file additional paperwork.

An individual may only have one ABLE account, and the total contributions to that account, including contributions by friends and family members, are limited to $14,000 per year, the current annual gift exclusion amount. The first $100,000 held in such an account will be exempt from SSI means-testing, and any overage will suspend SSI payments until the account falls below such threshold. The maximum balance that may be maintained in an ABLE account will mirror a state’s limitations on 529 education-related savings accounts. In Virginia, such an account balance may not exceed $350,000.

Funds in ABLE accounts may be used for “qualified disability expenses.” This may include housing, transportation, health care, education, job training, assistive technology, and certain other expenses. Further guidelines will be developed by the Treasury Department in 2015.

Each state choosing to provide their residents with an opportunity to invest in an ABLE account will be tasked with establishing their own program that will meet the requirements established by the federal government. It is expected that the first ABLE accounts will be available before the end of 2015. ABLE accounts, although a new and important tool, should only be established by an individual after consulting with an experienced special needs planner to assess the options available. This consultation will be critical as a result of key provisions contained within the ABLE Act, such as the Medicaid payback requirement. Hook Law Center looks forward to providing families with advice and assistance regarding ABLE accounts.

Stephen Beck, a Virginia man whose daughter Natalie has Down syndrome, was the chief architect of the ABLE Act and a tireless advocate for the legislation, believing that families with special needs should have a way to save for their future. Beck passed away unexpectedly on December 8, 2014, just five days after the ABLE Act was passed by the U.S. House of Representatives. The name of the bill has been altered to honor Mr. Beck, and his daughter Natalie will be the first ABLE account beneficiary in the U.S.

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