ABLE accounts are complementary to special needs funds

The Achieving a Better Life Experience (ABLE) Act allowed accounts to help people with disabilities (and their families) save and pay for disability-related expenses. ABLE allows states to create tax-advantaged savings programs for eligible persons with disabilities. Distributions from ABLE accounts are tax deductible if they are used to qualify for disability expenses. Here’s a link to compare different ABLE plans for the state.

ABLE accounts can be used by those who were disabled before the age of 26. Regulations issued in 2020 allow these individuals to transfer money from eligible education programs – the 529 Plan – to ABLE accounts.

Contributions are not federally tax deductible. However, dividends and dividends are tax-deductible to the beneficiary if they are used to pay qualified disability expenses such as:

  • housing
  • education
  • communications
  • the health
  • Recruitment training and support
  • Assistive Technology
  • Personal support services.

In addition to the $15,000 annual contribution limit, a designated beneficiary who also works may contribute compensation up to the federal poverty level for a one-person household (but not if the employer has contributed to a defined 401(a) contribution plan, 403(b) annuity contract , or a 457(b) qualified deferred compensation plan). In 2021, this amounted to $12,880 (excluding Alaska and Hawaii).

Amounts in ABLE accounts are not considered “available resources” for Medicaid purposes. Furthermore, amounts up to $100,000 are ignored for Supplemental Security Income (SSI) purposes. This is very important. It allows the disabled beneficiary to obtain some resources without jeopardizing their benefits. Can you imagine if you had just $2000 to your name without being penalized? Without the ABLE account, this would be the horrible situation these individuals would be in.

The ABLE account allows the dignity of the beneficiary with special needs, in addition to many other benefits available. The question is not whether a disabled patron should have an SNT for his or her benefit or whether he should have an ABLE account. The question is why shouldn’t it be both? The ABLE account is a nice complement to SNT.

Stephen C. Hartnett, JD, LLM
Education Manager
American Academy of Estate Planning Lawyers, Inc.
9444 Balboa Street, Suite 300
San Diego, CA 92123
Phone: (858) 453-2128

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