Achieving A Better Life Experience – ABLE Accounts

Achieving A Better Life Experience – ABLE Accounts

2016 could be a banner year for Ohioans with disabilities and their families as our Treasurer of State rolls out a program to establish ABLE accounts. These tax advantaged savings accounts will allow individuals with special needs and their families to save for “qualified disability expenses” in the same way that a 529 plan allows families to set aside money for college expenses.  The funds accumulated in the ABLE account will not disqualify the beneficiary for needs-based public benefits such as SSI, Medicaid, Section 8 Housing, and food stamps.

Why would an ABLE account be needed?

Public benefits such as SSI and Medicaid are “needs-based”. In order to qualify, a person must have limited assets. To avoid jeopardizing their benefits, people live in a chronic state of poverty. They cannot save for big purchases.

The ABLE account can allow beneficiaries with small savings to qualify for Medicaid. It can give those on SSDI or SSI recipients with part time jobs an easy place to accumulate excess earnings. Family members will be able to make small gifts to encourage independence.

Who qualifies for an ABLE account?

To qualify for an ABLE account an individual must be disabled as defined by Social Security standards and the disability must have begun prior to the age of 26. Contributions can be made by anyone (the account beneficiary, family or friends).

What expenditures are allowed?

A “qualified disability expense” can include education, housing, transportation, employment training and support, assistive technology, health care expenses or financial management costs. These expenses can enhance the beneficiary’s quality of life by providing goods and services not covered by public benefits.

Are there limits as to how much money can be put in the ABLE account?

Each beneficiary can have only one ABLE account. Total contributions to the account can be no more than the annual gift tax exclusion ($14,000 in 2016). If the ABLE account balance exceeds $100,000, SSI income will be suspended until it is reduced, but other programs won’t be affected. Each state that adopts an ABLE program will set a maximum limit on the account.

What happens when the ABLE account beneficiary dies?

When the beneficiary dies, the money in the account must be used to reimburse the state for expenses paid by Medicaid.

How is an ABLE account different than a Special Needs Trust or Pooled Trust?

The ABLE account will cost less to establish and maintain than a Special Needs Trust or Pooled Trust and will allow beneficiaries to control their own money. This will make the ABLE accounts much more flexible and accessible. Funds in the account may also be more susceptible to misuse and penalty as they will lack the oversight of a Trustee. Trusts will still be better suited for large personal injury awards and inheritances.

Where can I establish an ABLE account?

You will be able to establish an ABLE account in any state that has an established program, but only one account can be established per beneficiary. Each state will determine which financial institutions will administer the ABLE accounts.

At the present time, no state has a fully developed ABLE plan. Ohio is on track to have one of the first.

ABLE accounts will be a valuable new resource for qualified beneficiaries and their families. Consult a knowledgeable elder law or estate planning attorney to discuss how they will coordinate with trusts, guardianship’s, and other legal issues affecting people with special needs.



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