December 19, 2014 was a red letter day for individuals with disabilities and their families. That’s the day that President Obama signed into law the Achieving a Better Life Experience (ABLE) Act. The ABLE Act provides folks with disabilities the same types of flexible savings tools that all other Americans have through college savings accounts, health savings accounts, and individual retirement accounts.
Millions of individuals with disabilities and their families depend on a variety of public benefits for health care, income, housing assistance and food. In order to be eligible for these benefits, children and adults with disabilities have had to show limited income and no more than $2000 in savings. To keep these basic benefits, they have had to remain well below the poverty line.
Most parents of children with disabilities are advised soon after their birth not to put assets in their child’s name, because it could make them ineligible for government benefits. Once these children are old enough to work, they may end up unemployed or in low paying jobs, so as not to risk losing Medicaid or Supplemental Security Income (SSI).
Soon, however, parents and other folks can create tax-free savings accounts (529-ABLE Plans) for their children or other individuals with disabilities and put up to $14,000 a year into them for those extra living costs like:
- education (books, tutors, community college tuition etc.)
- health and wellness (therapies, dental services, respite care, etc.)
- assistive technology, √ transportation √ housing (for a primary residence),
- job support, and
- other miscellaneous expenses.
To qualify to be a beneficiary of a 529-ABLE Plan an individual must be receiving or be eligible for SSI or SSDI benefits OR have a medically determined physical or mental impairment which results in “marked and severe functional limitations.” In addition, the disability must have occurred before age 26.
Effective date for ABLE Plans
Now that the federal ABLE Act allows for ABLE accounts, each state must put rules in place, so that financial institutions can make the new offering available. Hawaii’s House of Representatives drafted HB 119 “to establish a qualified tax exempt savings program to encourage and assist individuals and families to save private funds to support individuals with disabilities.” The bill has passed the Health Committee and been referred to the Finance Committee. Hopefully the bill will become law this session, so that 529-ABLE Plans can be set up in 2015.
In the meantime, families are encouraged NOT to exceed the current savings restriction of $2000, if their child is receiving government benefits. Parents may also want to check with an estate planning attorney to find out how the new 529-ABLE Plan differs from a Special Needs Trust. One difference is that some monies in an ABLE Plan account may have to be refunded to Medicaid, if the beneficiary dies and has been receiving Medicaid benefits.
NDI article “ABLE Accounts: 10 Things You Must Know”