On December 19, 2014, the Achieving a Better Life Experience Act (ABLE Act of 2014) was signed into law. The ABLE Act allows for those with disabilities to have a supplemental source of income beyond those provided by governmental programs, such as Medicaid and social security.
The ABLE Act allows people with special needs to create tax-free savings accounts (ABLE accounts) that can be used to pay for any expenses related to the eligible individual’s blindness or disability that includes transportation, personal support services and health care, among other expenses.
Structurally, ABLE accounts are built upon the foundation of the current 529 Education Savings Plans that help families save for college. The ABLE Act provides persons with disabilities the same types of flexible savings tools that others have through college savings accounts, including choice of investment strategies. Similar to 529 plans, income earned by the accounts will not be taxed, and contributions to the account are not tax-deductible.
ABLE accounts are limited to those individuals with “significant disabilities” with an age of disability onset before turning age 26. If an individual meets this criterion and is also receiving benefits already under SSI and/or SSDI, they are automatically eligible to establish an ABLE account. If a person with a disability is not already receiving SSI and/or SSDI, there is a certification process, which may apply to open an ABLE account. This certification cannot be used to qualify for SSI or SSDI.
Federal regulations have been established, and states are preparing to offer ABLE accounts. Individuals will be free to open ABLE accounts in states other than their home state, similar to 529 accounts. This will be important if the special needs family’s home state takes a while to roll out their program. Ohio and Florida are targeting May/June of 2016 for their offering, so they will likely be among the first.
If you have any questions about special needs planning or ABLE accounts, please call our office at 913-345-2323. We will be happy to assist you in any way possible.