ABLE ACCOUNTS FOR DISABLED ADULTS
Achieving A Better Life Experience (ABLE) Accounts were authorized by Congress in 2014 with the goal of allowing persons with disabilities to manage their own assets without threatening their public benefits eligibility.
What are the benefits of an ABLE account?
Individuals receiving public benefits will be disqualified if he or she has countable resources over a certain amount. For example, to qualify for Supplemental Security Income (SSI), an induvial must have countable resources under $2,000. Further, SSI benefits can be reduced if the beneficiary received food and shelter support (in-kind support and maintenance, ISM) from a third party. This makes accumulating assets and saving for the future nearly impossible for individuals with disabilities.
The Special Needs Trust (SNT) was established as a tool to provide assets to a disabled individual without disqualifying the individual from critical public benefits. However, legal fees associated with initially establishing the trust and later managing the trust can be a major drawback, especially when meager amounts are involved. Moreover, the beneficiary has very little control of assets which is frustrating for a beneficiary with capacity to manage their own financial matters.
Therefore, ABLE accounts can be an economical and empowering alternative to establishing a Special Needs Trust.
How do you contribute to the account?
Anyone, including a trust, can contribute to an ABLE account. Currently, the ABLE account can only be annually funded with an aggregate amount equal to the annual gift tax exclusion (currently $15,000). Therefore, it is not feasible to fund an ABLE account all at once with an inheritance. A SNT is still the best route in that respect.
The maximum amount an ABLE account can hold is $100,000 without disqualifying the beneficiary from SSI and $475,000 for Medi-Cal disqualification. The regulations allow a SNT to contribute to the fund. This is a great tool to 1) allow the beneficiary access to a controlled amount of money or 2) spend down assets of an SNT if currently under court supervision and accruing legal fees for accountings.
What purchases can be made?
Purchases for a qualified disability expenses will be disregarded when considering eligibility for a means-tested public benefit. A “qualified disability expense” is an expense related to the beneficiary’s blindness or disability that assists him or her in increasing and/or maintaining their health, independence and/or quality of life. These may include expenses related to education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, legal fees, funeral and burial expenses, financial management and administrative services and other disability related expenses that the beneficiary might incur as a result of having a disability.
Who qualifies?
To qualify, an individual must have been diagnosed with a disability before age 26. The beneficiary can establish “disability” by either showing that he or she qualifies for SSI or certifying that he or she has a medical impairment which “results in marked and severe functional limitations.”
Where to establish?
ABLE accounts are managed by individual states. California ABLE accounts are set to open later in 2018. For updates on implementation visit the CalABLE website http://www.treasurer.ca.gov/able/ . Until then, qualified individuals can establish ABLE accounts in other states and will be able to transfer their account to California in the future, if advantageous. The ABLE National Recourse Center is a great source to compare individual state’s accounts http://www.ablenrc.org/state_compare .
View other article on special needs trust and supplemental security income