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The Basics of the ABLE Act

by | Mar 31, 2020 | Case Study

Achieving a Better Life Experience (ABLE) Act was signed into law on December 19, 2014. The ABLE Act amends Section 529 of the Internal Revenue Service Code of 1986 to create tax-free savings accounts for individuals with disabilities. An ABLE account may fund a variety of essential expenses for individuals with disabilities and is a powerful tool to use while planning for individuals with special needs.

Disability rights advocate and ElderCounsel’s National Board Member Stephen Dale took time to discuss ABLE Act basics and some key features.

Key Features of the ABLE Act:

  • To be eligible you must be disabled before the age of 26.
  • Contributions into an ABLE account could be made by any person;
  • Contributions would not be tax deductible;
  • Income earned by the accounts would not be taxed;
  • Account withdrawals, including portions attributable to investment earnings generated by the account, for qualified expenses would not be taxable;
  • Individuals would be limited to one ABLE account, and total annual contributions by all individuals to any one account could be made up to the gift tax limit ($15,000 in 2018)
  • Aggregate contributions to an ABLE account would be subject to an overall limit matching the state limit for Section 529 accounts
  • Individuals with ABLE accounts could maintain eligibility for means-tested benefits

ABLE and Supplemental Security Income (SSI) Eligibility

  • If the beneficiary is receiving SSI benefits, when the assets in the account total $100,000, any monthly SSI benefits will be placed in suspension.
  • If the assets in the ABLE account drop back below $100,000, the SSI benefit suspension ceases and any SSI benefit resumes
  • The beneficiary will not have to reapply for SSI benefits once the account drops back below the $100,000 threshold.

ABLE and Medicaid Eligibility

  • ABLE account beneficiaries do not lose Medicaid eligibility based on assets in their ABLE account or suspension of SSI benefits.

What can be contributed to an ABLE account?

  • ABLE accounts can only accept cash (No stock, 401K, IRA, etc.)