ABLE Accounts: A New Means to Preserve Benefits for Disabled Clients, 0918 ALBJ, 79 The Alabama Lawyer 327 (2018)
| Author | By Jack T. Carney |
| Position | Vol. 79 5 Pg. 327 |
By Jack T. Carney
Many times an attorney will receive a distress call from a client with a disability because of the threatened loss of essential government benefits. These much-needed benefits (such as SSI or Medicaid) may be at risk due to the receipt of a personal injury award or an unexpected inheritance. Through “special-needs planning,” often an attorney can help the client both protect their new resources and maintain their government-provided care (and feel like a super hero in the process). The traditional tool used to accomplish this feat is a special needs trust. However, attorneys now have a new gadget in the planning utility belt: Achieving a Better Life Experience (ABLE) accounts.
ABLE accounts are a new development in special-needs planning. Congress passed the ABLE Act in 2014 and most states began offering accounts in 2016. In 2017, there were two amendments to the ABLE Act that made the accounts an even more powerful tool for disabled individuals.1
ABLE Basics
The ABLE Act allows disabled individuals to establish tax-advantaged savings accounts, which are quite similar to Section 529 education savings accounts. The advantage of an ABLE account is that any income earned in the account is not taxable. More importantly, the account is not a countable resource for government benefit purposes (subject to certain restrictions discussed below). The assets in the account can be spent on qualified disability expenses (very similar to the education account rules where assets must be spent on qualified education expenses).
This Act is significant because it allows a disabled individual to have more leeway in saving money for future expenses. The general rule is that an individual is ineligible for SSI and Medicaid (two of the primary assistance programs) if they have more than $2,000 in countable resources.[2] Therefore, a typical savings account exceeding $2,000 would automatically disqualify that individual from such needs-based assistance. An ABLE account can hold these funds for the individual's use without the loss of benefits.
Anyone can establish and contribute to an ABLE account, but the account must be established for a "designated beneficiary."3 Even the designated beneficiary himself or herself can establish and contribute to an account. There are several important requirements and restrictions regarding ABLE accounts:
1. A beneficiary may have only one ABLE account;[4]
2. The beneficiary's qualifying disability must have occurred prior to age 26 (however the account can be established at any age, so long as the qualifying disability occurred prior to age 26) ;5
3. The beneficiary must be "disabled." The beneficiary is deemed disabled if he or she is receiving either SSI or SSDI6 A doctor may also sign a certification regarding the beneficiary's disability status;7
4. There are certain financial limits for these accounts. First, the total amount that may be contributed on a yearly basis is $15,000.8 This amount is the same as the annual gift tax...
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