A New Savings Vehicle for People with Disabilities
In December 2014, Congress passed the Achieve a Better Life Experience (ABLE) Act, which creates tax-favored accounts for individuals whose disability occurred before age 26. The law permits these accounts to receive up to the annual gift-tax exemption amount ($14,000 in 2015), and anyone, including the individual, can make contributions to the account. Modeled after Section 529 college savings plans, the funds in the ABLE account can be used for broader purposes, including transportation, employment, support, health and wellness, and assistive technology. Each beneficiary can have only one ABLE account and the first $100,000 in the account is non-countable for purposes of eligibility for Supplemental Security Income. Any funds remaining when the beneficiary dies are subject to payback to the state for Medicaid benefits received by the beneficiary. A similar statute was passed in Massachusetts in August of 2014. It will take time to implement the federal and state laws and estate planning professionals are still learning how best to incorporate the ABLE account in planning for people with disabilities.