ABLE ACT

ABLE ACCOUNTS

      In 1993 it became possible for persons with disabilities to have a trust to supplement what they receive in needs-based benefits and still maintain their eligibility for such benefits. The ABLE Act adds another option.  With ABLE, an individual may have a private fund for disability-related expenses in addition to the $2000 already allowed.  Although the Act was passed by Congress in December 2014, each State then had to take action to implement its own version. In March 2017 the State of Alabama took its final steps and opened enrollment.  Rather than create its own program, Alabama has partnered with the State of Nebraska, which already had its own program underway.  We will be glad to discuss with you ways that the ABLE account can be used with other special needs planning for your loved one.

Overview

n  One account per person

n  No more than $14,000 a year contribution from whatever source

n  No income tax deductions for any contributions

n  Can qualify for gift tax exclusion (since is a present interest gift)

n  Total in account cannot exceed $100,000 for SSI recipient

n  Total for non- SSI recipient is same limit as Alabama’s 529 plan--around $350,000

n  Account beneficiary is the account owner.  Similar rules as apply in 529 plans: no income taxes as long as withdrawals are used for qualified disability expenses 

n  Beneficiary can be any age as long as he/she has a severe disability which occurred before the age 26

n  To avoid penalties/ loss of eligibility, account distributions must be spent on qualified disability expenses the same month they are withdrawn.

n  Medicaid must be reimbursed at the owner’s death to the extent of Medicaid expenses incurred after ABLE account is opened.

Qualified Disability Expenses:

            Housing

            Education

            Transportation

            Employment training and support

            Assistive technology and related services

            Health

            Prevention and wellness

            Financial management and administrative services

            Legal fees

            Expenses for ABLE account oversight and monitoring

            Funeral and burial

            Basic living expenses

 

What makes this so important:

n  Gives individuals with disabilities a way to own and use assets in excess of $2000

n  Allows individual to have more control over his/her own affairs

n  Individual does not have to receive SSI or Medicaid to have an ABLE account

n  Can use account to pay for housing expenses: mortgage (including property insurance required by lender), real property taxes, rent, heating fuel, gas, electricity, water, sewer and garbage removal, without reducing the monthly SSI check

Possible uses:

n  To hold small inheritance or personal injury award  (in lieu of 1st party SNT)

n  To hold gifts from family

n  To hold UTMA accounts that must be paid at age 18 or conservatorships at age 19

n  To save for purchase of car or house

n  To deposit earnings from employment

n  To receive spillover when individual’s account exceeds $2,000