In 2014, Congress passed a rare bipartisan bill. The Achieving a Better Life Experience (ABLE) Act allows people with disabilities to set up saving accounts without impacting their Medicaid and Supplement Security Income eligibility. The money in the account would not factor into the $2000 asset limit for disability and other federal benefits.
The legislation required each state to set up its own program. Georgia has yet to do so, but a growing coalition of disability organizations is currently working to pass the ABLE Act in Georgia. While these accounts will not be a replacement for special needs trusts in estate planning, they could help families raising disabled children.
The aim of the law was to provide people with disabilities flexible savings tools similar to tax-advantaged college savings, healthcare and retirement accounts available to others. Unlike these other accounts, it is important to note that the law contains a Medicaid payback provision when the beneficiary dies.
Details of how ABLE accounts will work
Updated Internal Revenue Service regulations treat these accounts similarly to 529 college accounts. The IRS will not tax income earned in an ABLE as long as the funds go toward qualified disability expenses.
ABLE accounts are only available if disability occurred before age 26. Anyone can contribute to an ABLE account, but total yearly contributions are capped at $14,000 (this is the same as the gift exclusion).
The balance in an ABLE account would be able to reach $100,000 without limiting SSI eligibility. A higher balance could lead to suspension of SSI benefits, but it would not affect Medicaid eligibility.
What are qualified disability expenses?
These are things improve independence, health and quality of life. An example is taken from a recent National Public Radio interview, a paraplegic described how friends had raised $20,000 to buy a wheelchair-accessible van to get to college. Because he feared losing SSI and Medicaid, he kept the some of the cash in his closet. With an ABLE account, he would have been able to safely store the funds in a bank earning interest.
Other examples include:
- Assistive technology like screen reading software or modified keyboard
- Housing renovations such as a ramp or larger doorways
- Employment training and support
- College education
Continue watching for these accounts in Georgia. They may provide an addition planning tool in building a comprehensive estate plan.
An estate planning attorney can explain how an ABLE account might coordinate with a special needs trust.