What are ABLE Accounts?

ABLE Accounts are savings plans specifically for those with disabilities.

In 2014, the Achieving a Better Life Experience (ABLE) Acts became federal law as part of the Tax Increase Prevention Act of 2014.

According to an NJ101.5 article, titled “Special accounts for the disabled,” the plans are designed to help individuals remain eligible for means-tested benefits like Medicaid and Supplemental Security Insurance while saving their own money for care.

The money in these accounts may be used for health care, transportation, education, housing and other expenses.

Using the 529 college savings plans as an example, the ABLE Accounts protect interest earned on these savings from income tax.

Before you set up an ABLE Account, there are some things you should know.

1. Your disability must have happened prior to turning 26 to qualify.
2. You are only allowed one ABLE Account.
3. Contributions to the account will not be tax-deductible.
4. Annual contributions are capped at the federal annual gift tax exclusion ($14,000 this year).
5. If your account exceeds $100,000, you lose Supplemental Security Insurance benefits.
6. If you die, remaining funds will go first to Medicaid paybacks.

How do you get an ABLE Account?

These plans are offered through the states, but many do not currently have the program in place.

In fact, just the Buckeye State (Ohio).

Why?

Before financial institutions are allowed to offer the plans, the states where they are located must first adopt regulations for the plans.

The good news?

As noted, Ohio offers this plan and their Ohio STABLE accounts are available to qualified individuals from any state.

Although ABLE accounts are a new tool for those with special needs, there are still other options.

Certain special needs trusts can help you if you are worried about Medicaid payback or contribution limits.

Before opening an ABLE account, meet with an experienced estate planning attorney to discuss your goals and create the best plan for you.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: NJ101.5 (July 1, 2016) “Special accounts for the disabled”