Article New Able Act Eases Financial Planning for Families of Individuals With Disabilities

• Publication year: 2015
• Pages: 32

Article New ABLE Act Eases Financial Planning for Families of Individuals with Disabilities Vol. 28 No. 3 Pg. 32 Utah Bar Journal June, 2015

May, 2015

Michelle Mumford, J.

In December 2014, Congress passed and the President signed the Stephen Beck, Jr., Achieving a Better Life Experience (ABLE) Act of 2014. This new law allows for tax-advantaged savings accounts for people with disabilities. Balances in these accounts will not affect eligibility for means-tested government programs like Social Security and Medicaid. Funds accrued in the account can be used to pay for education, health and dental care, transportation, housing, employment training, and other expenses related to living with a disability. The legislation also includes protection against Medicaid fraud abuse and a state Medicaid pay-back provision.

Interest income earned on the savings accounts is tax-free. Unlike 529 accounts, contributions to ABLE accounts by any individual are made with after-tax monies and are not deductible against federal taxes. So in a typical scenario, a grandparent could deposit $5,000 into a ABLE account on behalf of an individual with a disability. That $ 5,000 will not reduce the grandparent's taxable income. The $5,000 will accumulate interest tax-free and be available for withdrawals (tax free) for disability-related expenses. The $5,000 will not affect the beneficiary's eligibility for federal assistance, which is usually limited to individuals with assets totaling not more than $2,000, who do not earn more than $700 a month.

The Act is effective in 2015; however, each state must adopt the program by statute. Utah Senator Todd Weiler and Representative Rebecca P. Edwards sponsored Senate Bill 292 during the 2015 legislative session to incorporate the ABLE Account program into Utah statute. Having passed the Utah Legislature, the bill was signed into law by the Governor and takes effect on May 12, 2015. The Utah version of the ABLE Act includes a state tax credit of 5% of contributions.

The following are important details from the text of the federal ABLE Act:

• To be eligible, individuals must have a qualifying disability occurring before the age of twenty-six. If the individual is currently receiving benefits under SSI and/or SSDI, the individual automatically qualifies as having a qualifying disability. For those individuals not yet receiving SSI benefits (and therefore not automatically eligible), regulations to be written in 2015...