The Achieving a Better Life Experience Act of 2014 (“the ABLE
Act”) was signed into law by President Obama on December
29, 2014. This law has been much anticipated in the disability
community and has undergone many amendments and changes
prior to its passing.
Under this new law, states will have the option, beginning in
2015, to establish ABLE programs. These programs allow disabled
residents to save in excess of $2,000 in an ABLE account (also
referred to as a Medicaid Payback Account) for disability-related
expenses without impacting eligibility for other government
benefits. The ABLE account allows for tax free growth similar to
a Section 529 educational account or a ROTH IRA. Any person
can make non-tax deductible contributions into the account. The
income earned on the account will not be taxed and qualified
distributions are not taxable. Beneficiaries are limited to one
ABLE account. Total annual contributions to the account are
limited to the federal gift tax limit, which remains at $14,000.
Aggregate contributions on behalf of a beneficiary are also
restricted to the State limitation on Section 529 plans, which in
Massachusetts is currently $350,000.
An eligible individual must be disabled prior to age 26 and either
receiving SSI or SSDI benefits, or have a physical or mental
impairment resulting in marked and severe functional limitations
which are expected to last for at least 1 year or result in death. Once
an account is established for an eligible beneficiary, distributions
may be made for disability related expenses which include
education, housing, transportation, employment training and
support, assistive technology and personal support services, health,
prevention and wellness, financial management and administrative
services, legal fees, expenses for oversight and monitoring and
funeral / burial expenses. Distributions which are not disability
related will be subject to income tax on that portion attributed to
earnings from the account as well as a 10% penalty.
ABLE accounts should be viewed as another tool to use to
help create a comfortable and meaningful life for persons with
disabilities. However, families should be cautioned that these
accounts have drawbacks as well. ABLE account funds are not
counted as resources for other means-tested federal programs only
to a certain limit. SSI will only disregard up to $100,000 in an ABLE
account as a resource of the beneficiary. Once an ABLE account
has more than $100,000, SSI will be suspended (not terminated)
for the period of time the account is over-limit. Once the account
is spent down to $100,000 or less, SSI will be reinstated without the
need to re-apply. There is no asset limitation in ABLE accounts for
Medicaid eligibility, regardless of the suspension of SSI benefits.
It is also important to note that upon the death of the beneficiary,
any remaining funds are required to be paid back to MassHealth
for monies expended for medical assistance to the beneficiary
after the creation of the ABLE account. This differs significantly
from a third-party special needs trust which allows for family
members or other remainder beneficiaries to receive the unused
funds. Although these new ABLE accounts will allow for more
opportunities for individuals with disabilities, careful and
thoughtful analysis should be given to all estate planning options
in order to select those that are most beneficial to each person.
Before ABLE accounts can be set up, regulations will have to
be written and states will have to establish ABLE programs. In
anticipation of the passage of the Federal ABLE Act, Massachusetts
passed the establishment of ABLE accounts in Chapter 226 of the
Acts of 2014, more commonly known as the Autism Omnibus bill.
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