Achieving a Better Life…
Achieving a Better Life Experience (ABLE) Act of 2014, went into effect in 2015. There were three versions of the bill (H.R.647 113th Congress – ABLE Act 2014 notably 2/13/2013; 11/12/2014; and 12/3/20140) You may access the texts via www.congress.gov
As noted in the title of ABLE Act: “The purposes of this Title are as follows:
(1) To encourage and assist individuals and families in saving private funds for the purpose of supporting individuals with disabilities to maintain health, independence, and quality of life.
(2) To provide secure funding for disability-related expenses on behalf of designated beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance, the Medicaid program under title XIX of the Social Security Act, the supplemental security income program under title XVI of such Act, the beneficiary’s employment, and other sources.”
The ABLE Act is very significant because it allows people with disabilities and their families, to open savings accounts for disability-related expenses without jeopardizing Medicaid coverage and other means-tested federal benefits. There are certain restrictions to the accounts, for example (currently) the balance doesn’t exceed $100,000, without risking eligibility for Supplemental Security Income (SSI) benefits. (Read to bottom of this article.)
An ABLE account can only be opened for an “eligible” individual–one who’s entitled to benefits based on blindness or disability under title II or XVI of the Social Security Act, and whose blindness or disability occurred before the age of 26. In addition, a person with a “disability certification” is also eligible.
The ABLE Act 2014 culminated an eight-year campaign to gain approval for tax-free savings accounts to help individuals and families finance disability needs. The ABLE Act will require each state to set up mechanisms for the account. The regulations for these accounts may vary from one state to another. Virginia was the first state to begin the process of legislation. All state governments, along with banks and savings institutions will likely need time to set up the new financial offerings. Such financial accounts might be similar (but different) to the current 529 education savings plans that help families save for college. Account funds would generally not be considered for the supplemental security income (SSI) program, Medicaid, and other federal means-tested benefits, but there will be restrictions.
Some of the (current) qualified disability expenses encompassing the ABLE Act include: education; housing, employment training; personal support devices and assistive technology; health related; financial management and administrative services; and funeral and burial expenses. (Note, currently, funds remaining in a qualified ABLE account on the death of the designated beneficiary must be distributed to the state that holds the account. Read more on individual state legislation websites.)
In addition to the above expenses, included are other expenses as approved by the Secretary of Treasury.
Qualified programs may vary from state to state and a qualified ABLE program is one that’s established and maintained by a state, or agency or instrumentality of a state. Contributions for the benefit of an eligible individual to an ABLE account can be made for qualified disability expenses of the designated beneficiary of the ABLE account. Further, a qualified ABLE program must limit: (1) a designated beneficiary to one ABLE account
Presently, as the ABLE Act is written, a qualified ABLE program can only accept cash contributions, the total of which can’t exceed the current year’s limitation for gift tax exclusion (currently $14,000 per year). ABLE accounts will also allow for tax-free growth while the funds are in an ABLE account and allow for tax-free distribution when funds are used, provided they are used for the qualified disability expenses.
This is offered only as a brief synopsis of the ABLE Act 2014. Remember, state regulations are being written as this article is being posted! You are encouraged to continue to find out more information going forward from the federal and state government websites as legislation evolves. One website, www.disabilityscoop.com might prove helpful along with the websites of specific disability non- profit organizations.
Consult with a tax advisor for the individual tax implications for your circumstances.
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