The ABLE Act, also called “Achieving a Better Life Experience” Act, was passed by Congress and signed by President Obama on Dec. 19, 2014. This act will allow people with disabilities, who became disabled before they turned 26, to set aside up to $14,000 a year in tax-free savings, while still protecting eligibility for federal benefit programs, such as SSI and Medicaid, as long as the account balances do not exceed $100,000.
The Savings plan, ABLE, is similar to Section 529, an education savings plans for college-bound children. ABLE’s purpose is to encourage and assist individuals and families in saving private funds in order to maintain health, independence, and quality of life for their loved ones. Rather than focusing on educational needs, the new ABLE Act saving accounts help pay for disability-related expenses.
The three main features of the bill were to create a new subsection ABLE Account within Section 529 of the Internal Revenue Code, establish additional qualified disability-related expenses and protect the eligibility for federal benefit programs.
Qualifying Disability Expenses Include:
Education
- Tuition – preschool thru post ‐ secondary education,
- Books
- Supplies
- Educational materials related to education including tutors
- Education 6 services.
Housing
- Expenses for a primary residence,
- Rent
- Purchase of a primary residence
- Interest in a primary residence
- Mortgage payments
- Real property taxes
- Utility charges.
Transportation
- Expenses for transportation
- Mass transit
- Purchase or modification of vehicles
- Moving expenses
Employment Support
- Expenses related to obtaining and maintaining employment
- Job ‐ related training
- Assistive technology
- Personal assistance supports
Health Prevention and Wellness
- Expenses for health and wellness
- Premiums for health insurance
- Mental health, medical, vision, and dental expenses
- Habilitation and rehabilitation services
- Durable medical equipment,
- Therapy
- Respite care
- Long term services and supports
- Nutritional management
- Communication services and devices
- Adaptive equipment
- Assistive technology
- Personal assistance
Miscellaneous Expenses
- Financial management and administrative services
- Legal fees
- Expenses for oversight
- Monitoring; home improvement, and modifications
- Maintenance and repairs, at primary residence
- Funeral and burial expenses.
Possible Limitations to the ABLE Act Include:
- Only individuals whose disability was established before age 26 can set up ABLE Act accounts.
- Only individuals living in a state that has authorized ABLE Act accounts can participate.
- Only one ABLE Act account can be established per individual but there is no limitation on the number of individuals who can contribute to that one account.
- Total contributions for the benefit of a given ABLE Act beneficiary cannot exceed $14,000 in a single year.
- Upon the death of an ABLE Act participant, all money remaining in the account must be paid to the state Medicaid agency.
- If the ABLE Act account exceeds $100,000, the participant will lose eligibility for Supplemental Security Income (SSI). If the ABLE Act account exceeds between $235,000 and $452,210, depending on the state, Medicaid eligibility is lost.
- While ABLE Act funds can be used to pay for “qualified disability expenses”, any payments for other purposes may mean the account is instantly countable as a resource, disqualifying the participant from SSI and Medicaid eligibility.
There are many guidelines and complexities associated with drafting special needs trusts along with the rules for spending the funds in those accounts. It is important, that anyone planning to establish an ABLE account seek guidance from their special needs planner or a qualified attorney.
Harris Law is a lawyer well-versed with estate planning laws in Michigan including wills, trusts, conservatorships etc. and is here to help. If you are living in Northern Michigan and would like to know more, contact us today to schedule your free consultation. If you have other questions, you can contact us by phone at 231.347.4444 .
