Alert: Congress Passes New Law to Help Disabled Youth

Congress passed, and on December 19, 2014, President Obama signed the Achieving a Better Life Experience Act into law (ABLE Act). This is an incredible step forward for folks who become disabled before age 26. This new law will be an important part of the estate planning for any family with a qualified disabled individual.

What is an ABLE account?

The ABLE account amends the IRS Code to exempt from taxation a qualified ABLE account set up by a state to pay “qualified disability expenses” for a qualified disabled person. The term “qualified disability expenses” includes payments for education, housing, transportation, employment training, personal support service, preventative healthcare services, wellness, financing management costs, funeral expenses, and attorney fees!

How much can be put into an ABLE account each year?

A qualified person, family members, and friends can place up to $14,000 per year into an ABLE account. This amount is indexed for inflation the same as the gift tax exclusion amount.

Who can have an ABLE account?

ABLE accounts can be established for anyone found to be disabled under SSI or SSDI before age 26. Each state must establish alternate methods for proving a disability existed before age 26 for folks who have not or will not file for Social Security Benefits.

When can we set up an ABLE account?

The Federal government and Indiana must set up rules governing these accounts before you can set them up. We anticipate ABLE accounts will be available in late 2015.

How many ABLE accounts can a qualified person have?


What is the cap on the amount in an ABLE account?

There is a cap of $100,000 for SSI recipients and a cap of $300,000 for other beneficiaries. These accounts are similar to 529 College Savings accounts, so if your state has a cap on the amount that can be in a 529 plan, the same cap is in place for an ABLE account.

Example: My 21-year-old son is on Medicaid and SSI. Can he have an ABLE account? Yes, he can have an ABLE account. Generally he can only have $2,000 at the end of each month (the same amount as in 1989) to be eligible for SSI and Medicaid. Funds in his ABLE account are not counted in determining eligibility for SSI or Medicaid until the total account exceeds the cap amount. He or you can put up to $14,000 (total) into the ABLE account each year.

What happens to the funds if my son dies?

There is a Medicaid reimbursement rule and a rule that allows the funds to pass to another qualified individual. We will have to wait for the upcoming regulations to know how to handle this.

What should I do now if I have a disabled child?

You may want to have your estate planning documents changed to allow your personal representative/trustee to fund an ABLE account once such accounts are authorized.

January 2015

Categories: Article and Medicaid Planning.