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National Autism Network


The ABLE Act- What It Is and Why It Is Important

Posted by National Autism Network , in Legislation and Healthcare 02 February 2015 · 1,459 views

The ABLE Act- What It Is and Why It Is Important The Achieving a Better Life Experience (ABLE) Act was passed in December of 2014, allowing for individuals with disabilities to open tax-free savings accounts without fear of losing government benefits. Below is a breakdown of the legislation as it is currently written. However, the Treasury Department has yet to adopt regulations for this new legislation and as such the information below is subject to change.

Why is the ABLE Act important?
Under the prior legislation, individuals receiving government SSI benefits or Medicaid cannot have assets exceeding $2,000 without becoming ineligible for government benefits. The ABLE Act allows individuals with disabilities who receive these benefits to open tax-free ABLE accounts, which permits the account holder to possess assets upwards of $100,000 without losing government benefits. However, assets totaling $2,000 that are NOT a part of an ABLE Account can cause an individual to still lose government benefits.  The accounts are similar to “529” education savings accounts, but unlike these types of accounts, which can only be utilized for education-related expenses, ABLE accounts can cover a wide range of expenses.

What are the Qualifying Expenses under the ABLE Act?
While all of the details have yet to emerge, there are a number of areas that fall under the umbrella term qualifying expenses including housing, transportation, education, assistive technology, training, personal supports, assistive technology, financial management, and some personal items that all qualify as permissible expenses under the ABLE Act. Failure to comply within the restrictions of qualifying expenses may result in penalty or disqualification, similar to the process under special needs trusts.

How does the ABLE Act benefit individuals with disabilities?
Aside from the creation of a tax-free savings account, the ABLE Act can help instill fiscal responsibility in individuals with disabilities. Before this legislation, individuals with disabilities were unable to have assets that exceeded $2,000 without losing benefits. This resulted in a lot of needless spending just so the individual would remain under the $2,000 threshold. Now, individuals can earn their own money and save it responsibly, without fear of losing benefits until they reach the $100,000 cutoff.

Who is qualified to open an ABLE Account?
Children and adults whose disability occurred before age 26 and who meet the SSI program’s disability standard would be eligible to open one ABLE account in their state of residence.

What are the limits of the ABLE Account?
Contributions to ABLE accounts are restricted to the annual gift tax exemption, which is currently capped at $14,000. Any more than this amount annually would be considered an asset and may cause the individual to become disqualified from benefits.

How does an ABLE Account differ from a Special Needs Trust?
Individuals with special needs trusts are permitted to open an ABLE account. Aside from the dollar restrictions, ABLE accounts differ from special needs trusts in that once the account holder passes away, the remainder left in the account is used to payback Medicaid for ALL costs incurred after the ABLE account was opened. Individuals should invest in both a special needs trust and an ABLE account, because SNTs have no dollar limits, annual limits, and does not have a payback provision to Medicaid when the account holder passes away. A Special Needs Trust can be left to family members or a third party, instead of having to undergo payback provisions to Medicaid. ABLE Accounts are more ideal for individuals with disabilities who are earning an income as oppose to a SNT. At this time individuals may use their ABLE account to offset the costs of creating a special needs trust. It is advised that you seek out professional help when creating a SNT or opening an ABLE account.

How Many ABLE Accounts can an Individual Have?
Individuals can only open ONE ABLE account. However, at this time it is not clear whether or not an account MUST be in the disabled individual’s name or if an executor or guardian can open an account. Anybody can contribute to the account, as long as they do not exceed the annual gift limits.

How Much Money is permitted within the ABLE Account?
Once an individual’s ABLE account exceeds $100,000 they will no longer be eligible for government services. However, there is currently no defined total dollar amount limit one can have in the account. This is to be determined at a later date.

When will ABLE Accounts be available to individuals with disabilities?
As mentioned above, the Treasury Department must develop the regulations for ABLE. At which point, each individual state will be required to develop their own set of regulations, which will either be more strict or on par with what the federal legislation mandates.

Are there any other limitations to the ABLE Account?
Individuals will likely be limited to a certain number of annual withdrawals from the account and they must be utilized for qualifying expenses. However, the number of withdrawals has yet to be determined.

When will the government finalize the ABLE Act regulations and begin implementation?
We anticipate the federal regulations to be developed within 4 to 5 months (April/May), and then there will be another extended period of time to allow for individual states to develop regulations allowing them to bring ABLE Accounts to the marketplace. Optimistically, ABLE Accounts will be available to individuals with disabilities by the end of 2015.