Many people who have disabilities are unfamiliar with the ABLE Law or what an ABLE Account is and how it can help them. Recently in Nevada I have been helping educate people with disabilities and also attorneys and some judges who hear cases on ABLE. This has really educated me on the importance of an ABLE Account.
What is an ABLE account? An ABLE account is a tax-advantaged savings account where qualified individuals with disabilities can open a spending account as a result of the passage of the ABLE Act of 2014. The person can make a contribution to their ABLE accounts on an after-tax basis. The earnings from ABLE funds are tax-deferred and are tax-free as long as the person uses them for qualified disability expenses.
Why the need for ABLE accounts? In most states people with disabilities can only have $2,000 in assets at any given time in order to remain eligible for many federal programs that many depend on programs like Supplemental Security Income (SSI). Although under ABLE, they are now eligible for an ABLE savings account that will not affect their eligibility for SSI (up to $100,000), Medicaid and other public benefits. Also though the ABLE account it allows an increase this $2,000 asset limitation so that individuals account holder and their families can save money for their present and future needs.
Who is eligible to open an ABLE account? An individual must meet two requirements to be eligible for an ABLE account: an age requirement and a severity of disability. This means that the of symptoms of the person’s disability must have occurred before age 26. This is the current law, although there is a proposal in the U.S. Senate the “ABLE Age Adjustment Act, S. 651”, that would increase access to a newly established ABLE Accounts. This legislation introduced though a bipartisan effort by senators would raise the eligibility age for ABLE accounts from 26 to 46. You can check here to see if you senator is a co-sponsor, but current law states the ages is 26. https://www.congress.gov/bill/116th-congress/senate-bill/651
So, who can put in funds to an ABLE Account? Actually, anyone can contribute to the account, such as the account beneficiary, an employer, family and friends. Also depending on the state those deposits may or may not be tax deductible depending on the specifics of each state. So make sure you check your state ABLE requirements.
One of the main questions I hear is how can the funds in the account may be used? There are many different types of expenses that the ABLE Account Owner can use the funds for many different types of expenses. ABLE account funds can be used for any expense related to living with a disability. This can include basic living expenses, education, assistive technology, hiring personal care attendants, accessible housing, healthcare costs, transportation, and much more.
What defines you as an ABLE beneficiary? The definition of the disabled individual must have “marked and severe functional limitations” (essentially, a Social Security definition of disability). An individual whose disability occurred prior to age 26 and is already receiving SSI and/or SSDI is automatically eligible to establish an ABLE account. Those who are not recipients of SSI and/or SSDI but still meet the age of onset disability requirement will be eligible to open an ABLE account upon obtaining a disability certification from their physician.
If you think you or your family member qualifies for an ABLE Account, you can call your state treasurer’s office to find out what your state requirements are. Make sure when you google your ABLE in your state that the link is associated with your state.
A tax-free Achieving a Better Life Experience (ABLE) account lets people with disabilities save for their future without affecting their benefits. It also lets family and friends give them money.
If you have a qualifying disability that began before you turned 26, you may be able to save up to $27,140 each year in an ABLE account without affecting Medical Assistance, Supplemental Security Income (SSI), and most other benefits, as long as you meet all the other benefits rules.
Of that $27,140 per year, up to $15,000 can come from any source, including your family, friends, benefits, or other unearned income. If you have a job, you can save up to another $12,140, which can only come from your own earned income.
An ABLE account lets you:Build up savings without affecting your benefits: Up to $100,000 in your ABLE account won’t affect your SSI benefits. And no matter how much you have in your ABLE account, the money in it won’t affect other programs.
Get money from family and friends without affecting your benefits: Whether you earn the money yourself or it’s a gift from others, up to $15,000 each year can be added to your ABLE account without any changes in your SSI or other benefits.
Have a job, and save some or all of your earned income in your ABLE account.
Spend the money saved in your ABLE account on many types of daily expenses, not just medical costs: There are rules about how to spend the money, but there’s also a lot of flexibility.
Enjoy tax advantages: The growth of the investments in an ABLE account isn’t taxed, so your wealth will grow faster. However, when you take money out of the account, you have to spend it on qualified disability-related expenses, or it will be taxed as income.
The federal Achieving a Better Life Experience Act was signed into law in December 2014. The first ABLE programs opened to the public in 2016.
If you qualify, you can open an ABLE account in any state that has an ABLE program open to customers nationwide (you do not have to live in the state where you open an ABLE account). However, you can only open one ABLE account, so you need to decide which state offers the ABLE program that works best for you. The good news is that you can switch your ABLE account from one state program to another. You do not have to stick with the first state program you choose.
An ABLE account can be set up in addition to a Special Needs Trust, but an ABLE account costs less to set up and gives you more choice and control. Individuals with disabilities and their families may choose to have both an ABLE account and a trust.
Note: After you die, money in your ABLE account will be used to pay back the MA program for any benefits you received. If that could be an issue for your family, look into a third-party Special Needs Trust.If you have an ABLE account and