The Achieving a Better Life Experience (ABLE) Act allows a tax-free savings account to be created for a disabled child without risking eligibility for other public assistance. The aim of the ABLE Act is to remove bureaucratic obstacles to allow families to save money to help pay for long-term care for a disabled child.
Fixing A Problem For Parents With Disabled Children
Prior to the ABLE Act a child diagnosed with a disability could not have assets over $2,000 or earn more than $680 per month without forfeiting their eligibility for government programs such as SSI and Medicaid. The ABLE Act allows a tax-free account to accrue up to $100,000 in total. The maximum annual limit is based upon the current gift-tax limitation of $14,000 per year. The money in the account will be able to pay for most disability-related expenses. An ABLE account can be set up by a family member, friend, or the disabled person and all these parties can be contributors to the account as well.
An individual beneficiary is eligible to have an ABLE account if they become disabled before turning twenty-six, and:
- receives Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI); OR
- meets Social Security’s definition and criteria regarding significant functional limitations and receives a letter of certification from a licensed physician.
There is a limit of one ABLE account per person set-up in the state in which he/she resides. A disabled individual could be older than twenty-six but must have the documentation to prove he/she was disabled prior to twenty-six.
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Allowable Uses for ABLE Accounts
The funds deposited into the ABLE account could be used to cover most expenses for the disabled child such as: Education, Healthcare, Transportation, Housing, Employment Training, Assistive Technology, and any other expenses approved by the Secretary of the Treasury under the regulations. Any interest earned on the savings within the account would be tax-free as well.
Limitations on ABLE Accounts
Only the first $100,000 in an ABLE account would be ignored for SSI purposes. If the ABLE account was to exceed $100,000 SSI would only be suspended and not terminated. The beneficiary would still be eligible for Medicaid. There is the possibility of future state regulation of ABLE accounts similar to how College Savings Accounts are currently regulated. Upon the death of the beneficiary, any money left in the ABLE account could be partially recouped by Medicaid.
About Citizens Disability, LLC:
Since 2010, Citizens Disability has been America’s premier Social Security Disability institution. Our mission is to give a voice to the millions of Americans who are disabled and unable to work, helping them receive the Social Security Disability benefits to which they may be entitled.