Able Act And How It Might Impact You

By: Kristina M. Lenda

If you or a loved one is disabled, you may qualify for a special tax-advantaged savings ABLE account. This savings account is made possible by the Achieving a Better Life Experience Act, known as the ABLE Act. The ABLE Act was passed on December 19, 2014. Although it has been in existence for over two years, many people are unaware of the benefits of the Act.

There are several major advantages of ABLE accounts. The first is that any income earned will not be taxed and contributions to the account can be made by any person. Further, the owner of the account is also the beneficiary of the account. Although income earned on the account is not taxed, contributions (in most circumstances) are not tax deductible.

The second major advantage is that these accounts do not disqualify a disabled person for Medicaid, Social Security and other similar benefits. The ABLE Act provides that the disabled person can use the account for disability related expenses on behalf of designated beneficiaries with disabilities. The account is meant to supplement, not supplant, governmental benefits and private insurance. Qualified disability expenses include, but are not limited to, education, housing and transportation.

In order to be eligible for an ABLE account there are two criteria that you must meet. First, the onset of symptoms must have occurred prior to the age of 26. Second, the disabled person must have "marked and severe functional limitations." If you meet the age requirement and are already receiving SSDI or SSI, you automatically qualify for an ABLE account. If you meet the age requirement but are not receiving SSDI or SSI, you can still qualify provided that you obtain a disability certification from your physician.

ABLE accounts do have a few limitations that must be adhered to. First, the total annual contribution from all sources is $14,000.00. Second, if the individual is a recipient of SSI, the first $100,000.00 is excluded and does not affect the individual’s SSI benefits. However, if the amount exceeds $100,000, the individual’s SSI benefits are suspended until the amount fall below $100,000.00. Third, some state plans set caps which limit the ABLE account from exceeding $300,000.00. Lastly, some states also have the right to file a claim after the individual passes away seeking payback for the funds the State paid on the individual’s behalf during his/her lifetime.

The original ABLE Act required individuals to open ABLE accounts in their home state. However, in December of 2015 the U.S. Congress amended the ABLE Act and eliminated the residency requirement. Disabled individuals who meet the criteria described above can open an ABLE account in any state that offers a nationwide ABLE program. Although Connecticut does not currently have an ABLE program, there are several states that do, including Ohio, Tennessee, Oregon and Rhode Island. In addition, there are many states that are set to pass laws allowing these accounts within the next year.

When considering estate planning for an individual with disabilities, there are many factors to consider and options available. Whether an ABLE account is right for you or your loved one is a decision that should be made with the assistance of a professional who is versed in estate planning matters.