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New Investing Opportunities with ABLE Accounts
Disability benefits, such as Supplemental Security Income (SSI) and Medicaid, are only available to people who are extremely poor or who possess properties that are restricted by restrictive trusts. Federal legislation now permits disabled people to set up their own tax-free accounts, by which they can keep their benefits and still spend a substantial amount for themselves. The 2014 legislation, called “Achieving a Better Life Experience” (ABLE), permits disabled people on benefits to deposit and spend up to $100,000.00, or a lot more than that depending on the state, in tax-free accounts.
Before ABLE, disabled people on SSI or Medicaid had little incentive to plan for their future. They could only passively receive benefits, or they could receive money held in trust only if a trustee approved each and every restricted expenditure. Now the disabled can control their own money and they can even spend it on uses that would otherwise be disallowed by benefits programs.
Before ABLE, if family gifts to a disabled child on benefits were deposited into an ordinary dedicated account, as soon as that child reached the age of majority, the money in that account would cause benefits to be stopped. Now money can go into an ABLE account instead, and benefits can continue on into adulthood.
Or, a disabled person awaiting a litigation settlement can now, once the settlement arrives, deposit that money into an ABLE account and still continue receiving benefits. If a lump sum is over the yearly limit of around $15,000.00, an annuity can be purchased that will fund the ABLE account in monthly increments, thus keeping the account balance within the permitted yearly limit.
ABLE money can be saved, it can be invested at graduated levels of risk, or it can be spent tax-free on “qualified” disability expenses like job training, health care, or activities to improve quality of life like special-needs summer camps or equestrian therapy. ABLE money can even be used to pay for “in-kind support and maintenance” like housing expenses, utilities, or food, without incurring the benefits penalty that those expenditures might otherwise incur. The general idea is that benefits can be kept if ABLE money is spent on anything that legitimately improves or maintains a disabled person’s health, independence, or quality of life.
The Ohio version – called “STABLE” because the program is run by the state treasurer – provides a debit card. It even offers an eGift Event service, where the system sends an email to friends and family on birthdays or holidays and tracks contributors for sending thank-you notes!
ABLE is available for US citizens and legal residents in all states, even if your particular state hasn’t yet established its own system. Plans are available to anyone nationwide, regardless of domicile, by at least Ohio and Nebraska. Enrollment in all states, however, is subject to a few restrictions. ABLE plans are available only for individuals who were diagnosed with a disability before age twenty-six, with a condition expected to last at least twelve consecutive months. Only the ABLE owner, or that person’s authorized legal representative, can open and manage an account. Programs impose modest fees, how much depending on which state. Withdrawals by those who are on benefits, for in-kind expenditures like housing, must be spent the same month. Spending must be carefully documented. And finally, once the ABLE owner passes and funeral expenses and the like are paid, Medicaid can seek reimbursement from money left in the account for benefits furnished during the owner’s lifetime.
Enrollment is free and can be done quickly and simply online. Calls to the 800 number for the Ohio program were answered immediately and knowledgeably. For more information, visit the ABLE National Resource Center here.
Please contact us for advice on whether an ABLE account might work for you, possibly in association with a special needs trust as well. With ABLE and other legal tools like trust, all working together can allow a disabled person’s nest egg to grow and hatch into a better and more-independent quality of life. If you’d like to discuss your particular situation, please contact our Sherwood or Searcy office at 501-834-2070 to discuss how we can help you or your loved one.