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Achieving a Better Life Experience (ABLE) Act of 2014

What it means to you:

The Achieving a Better Life Experience (ABLE) Act of 2014, first introduced in 2008, amends the Internal Revenue Service Code to allow use of tax-free savings accounts for individuals with disabilities. Individuals will be allowed to use the funds in the savings accounts to cover education, housing, medical and transportation expenses, among others. Income earned in these accounts will not be taxed. Contributions to the account made by any person would not be deductible.

Why the need:

Individuals with a disability, and their families, depend on a wide variety of government assistance programs for income, healthcare, food, and housing assistance. Eligibility for these services is limited to individuals who report not more than $2,000 in assets such as cash savings, retirement funds and other items of value. Therefore, in order to maintain eligibility for these programs, an individual must maintain a very meager existence. The ABLE Act of 2014 will allow individuals with a disability to raise their standard of living while not jeopardizing their eligibility for benefits.

The ABLE account:

Administered by the States, the account is referred to as a “529A” account. It is similar in nature to the current 529 Plan that is used for college funding. Total contribution limits will vary by state, but the annual contribution will mirror the traditional 529 Plan amount of $15,000 per year. The amount will be adjusted annually for inflation. The first $100,000 in the account will be exempt from the Supplemental Security Income (SSI) $2,000 limit. Beneficiaries will lose their monthly SSI payment when their account value exceeds $100,000. However, they will continue to receive their Medicaid benefits. States will be able to recoup some of their expenses through Medicaid upon the death of the beneficiary. Additionally, upon the death of the beneficiary, the state in which the beneficiary lived may file a claim to all or a portion of the funds in the account equal to the amount in which the state spent on the beneficiary through their state Medicaid program. This is commonly referred to as the "Medicaid Pay-Back" provision and the claim could re-coup Medicaid related expenses from the time the account was open.

Qualified expenses:

A “qualified disability expense” is any expense that is related to the designated beneficiary as a result of living a life with disabilities. These include education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services and other expenses which help improve health, independence and/or quality of life.

Eligibility for an ABLE Account:

Eligibility is limited to individuals with significant disabilities with an age of onset of the disability before 26 years of age. Individuals who meet the criteria and are already receiving benefits under SSI and/or SSDI are automatically eligible to establish an account. Individuals that are not receiving SSI and/or SSDI, but still meet the age of onset disability requirement, may open an ABLE account if they meet the SSI criteria for significant functional limitations.

Special Needs Planning, LLC can help you shepherd your family through the maze of legal and financial complexities that can be associated with planning for the financial future of children, or other dependents, with special needs. For further information, please know that we would welcome your call at (262) 955-6636.