ABLE accounts are also known as 529A or 529 ABLE accounts. These are accounts that are run by the state savings program for people who are eligible in the United States but have disabilities. The rules that govern an ABLE account are down in the Internal Revenue Code section 529A. ABLE or Achieving a Better Life Experience Act of 2014 enacted this.
The funds that are inside the ABLE accounts are exempted from the Medicaid asset limit and SSI (Supplemental Security Income). ABLE accounts are savings accounts that are tax-advantaged for individuals who are disabled and their families. The income earned in this ABLE account is not taxed and the account owner is the account beneficiary.
History of ABLE
It was Stephen E. Beck, Junior’s plan to help his daughter save money that formed the base of the Achieving a Better Life Experience Act. Stephen’s daughter had Down Syndrome and needed money. Stephen was vice-chairman of the Down Syndrome Association of Northern Virginia Board of Directors and the National Down Syndrome Society.
The congress expressed broad support and eighty-five percent of Congress signed as cosponsors. Finally, on the nineteenth of December 2014, it was President Obama who signed the ABLE Act into law. Furthermore, Ohio, Nebraska and Tennessee were among the first three states that launched ABLE programs. The Jobs Act and Tax Cuts of 2017 had included language that belonged to the ABLE Financial Planning Act another act, ABLE to Work Act.
The ABLE Financial Planning Act does allow the rollover of 529 plans up into ABLE accounts.
Why is an ABLE account needed?
There are plenty of people out there, individuals who are disabled and they and their families rely on a good wide range of public benefits to make for their incomes, food, housing and more importantly health care. To be eligible for the above-mentioned benefits, one is required to meet a test called the means/resource test which qualifies the individual as eligible if they report with less than two thousand as retirement funds, savings and other such items having significant value. So the person should remain poor to be eligible for the above-mentioned benefits.
Advantages of ABLE Accounts
The ABLE Act was the first in public policy to recognize the significant extra costs of living with disabilities. This would, of course, include costs that relate to raising children with significant disabilities or raising a working-age adult from disabilities, transportation and accessible housing, health care and assistive technology which are usually not covered in insurance, Medicare, Medicaid, personal assistants, etc. The eligible people who open ABLE accounts can continue to remain eligible for Medicaid, SSI, HUD, FAFSA and food stamp benefits.
Are you Eligible for ABLE?
Eligibility is limited to individuals having disabilities that have an onset before turning twenty-six years old. If these requirements are met and you are also getting benefits from under SSDI and/or SSI, you are naturally eligible to create an ABLE account. And if you are still not a receiver of SSDI and/or SSI, but yet meet the age of onset requirement for disability, you still would be eligible to set up an account depending on whether you meet Social Security’s criteria and definition regarding functional limitations and if you arrange for a disability certified from a doctor or licensed physician, a D.O or an M.D would do. You also don’t have to be as young as twenty-six. You only need to have had an age of onset before turning twenty-six.
Are there any limits on the amount that is put into the ABLE account?
- As of now, the total annual contributions possible by all individuals involved, including friends and family for a tax year is $15000. This amount could be adjusted to account inflation periodically.
- As of current law, $15000, is the highest amount that can be gifted to someone without having to report it to the IRS.
- However, for those disabled individuals who receive SSI, the ABLE Act provides some further limitations. The primary $100,000 in the accounts is exempted from the individual resource limit of SSI $2,000.
- At the time when the ABLE account crosses the $100,000 limit, the SSI cash benefit of the beneficiary would get suspended until the account reaches behind $100,000.
- Although the eligibility of the beneficiary for SSI cash benefits would be suspended, this would not affect their eligibility to obtain medical assistance via Medicaid.
- Furthermore, if the beneficiary dies, the state where the beneficiary lived could file claims to a portion or all of the account funds equal to that amount the state spent for the beneficiary via the Medicaid program of the state. This is also known as provision for Medicaid Payback.
What are the Expenses that are allowed for ABLE accounts?
“Qualified Disability Expense could mean any expense that is related to the beneficiary as a consequence of living a disabled life. That includes housing, transportation, education, support and employment training, personal support, assistive technology, financial management, expenses for health care, administrative services and many other expenses that help progress the independence, health and the quality of the life they lead.
Are there options of investing the savings
States do allow families and qualified individuals with multiple options of establishing accounts with different strategies for investment. Each person has the chance to assess future needs and costs that are possible over time and to also assess their tolerance of risk for the possibility of future investment methods to help grow the savings. Though, ABLE owners are constrained, by the Act, to change how their money gets invested up to a maximum of two times in a year.
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The Difference of an ABLE account and Pooled or Special Needs Trust
ABLE accounts provide the user with more control and choice for the family and the beneficiary. The cost incurred in setting up an ABLE account likely becomes comparatively less than both Pooled Income Trust or Special Needs Trust. ABLE account owners still have the permissions to manage the amounts.
When deciding on the programs provided by your State for setting up ABLE accounts and/or its management, it is worth considering the points listed as follows.
- The documentation that the ABLE program will require from you when you open an account.
- If there is a minimum contribution required to open the ABLE account
- If there are any restrictions on the frequency of fund withdrawals from your account.
- The investment options that the state will be providing you with.
- If there are any value-added programs offered to help you manage your account and if there is, what kind of service that would be.
- If there is an availability of programs in your state
- If there is an option for debit and credit cards and if there is, is there any extra costs incurred to this option.
Are you a person with a disability or any such medical conditions that require Financial Aid? Learn more about ABLE accounts and get help with setting up an ABLE account. For more help and resources contact us at hopemyworlds.com to get aid with setting up an ABLE account. Open an ABLE account now. Check out if you are eligible to apply for an ABLE account and the options provided by your state in the setting up of your account.