One of the major issues faced by families of disabled persons is how best to contribute to, or cover, the disabled persons out-of-pocket expenses, without disqualification for Medical Assistance and other need-based assistance programs.
Special or Supplemental Needs Trusts, or Pooled Income Trusts, are options for families to provide a disabled loved-one with necessary funds for out-of-pocket expenses. However, a new option has been created by Congress with the passage of The Achieving a Better Life Experience Act of 2014 (ABLE Act) in December, 2014.
The ABLE Act creates a tax advantage account is a tax advantage saving account (“ABLE Account”) for individuals with disabilities and their families. ABLE Accounts will permit eligible individuals and families to establish a savings account which would not affect the beneficiaries’ eligibility for Supplemental Social Security Insurance (“SSI”), Medicaid or other public benefits. Among the anticipated benefits of an ABLE Account are the lower costs of establishment and more choices and control for the beneficiary and the family over how the funds are used.
The ABLE Accounts are available to individuals with significant disabilities, with the onset of the disability occurring before the individual turns twenty-six (26) years of age. If an individual receives benefits under SSI or Social Security Disability benefits, he or she is automatically eligible to establish an ABLE account. Income earned by the accounts will not be taxed. However, contributions to the account made by the account beneficiary, family or friends, will not be tax deductible.
The United States Treasury Department is currently developing regulations governing eligibility. It is anticipated that these regulations will be released in 2015.
According the ABLE Act, the total annual contribution by participating individuals, including family and friends, will be $14,000.00 per year. This account amount would be adjusted annually for inflation. The total funds in the ABLE Account would be subject to the beneficiaries’ State limits for education related 529 savings accounts. Many States have set this limit at more than $300,000.00 per plan. The ABLE Act would exempt the first $100,000.00 from the SSI $2,000.00 individual resource limit.
ABLE Accounts may be used for education, housing transportation, employment training, support, assistive technology, personal support services, healthcare expenses, financial management and administrative services.
The State of Minnesota will be responsible for establishing and operating its own ABLE program. It is likely that Minnesota will accept applications to establish ABLE accounts before the end of 2015.
For further information regarding the ABLE Act, please consult the website of the National Disability Institute www.realeconomicimpact.org
Please feel free to contact our office if you would like to discuss options for providing support for a disabled family member or loved-one.