ABLE Accounts

The Achieving a Better Life Experience Act (ABLE Act of 2014) was signed into law on December 19, 2014. The Act was the result of an effort from the disability community to expand the use of 529 plans, which were designed as tax-free college savings plans.

The ABLE act was initially designed to just be a “disability” version of 529 plans. You would have to use your own state plan, and there were other significant restrictions. To everyone’s surprise, and with no fanfare, when it finally came out it had provisions which were likely unintended but which are extraordinarily useful.

When an individual receives SSI or Medicaid, they are obligated to report to DSHS by the 10^th of the following month any money received from any source. See https://www.ssa.gov/ssi/spotlights/spot-reporting-earnings.htm. SSI is then reduced on a dollar for dollar basis, and your Medicaid reimbursement/payment may also be affected. This is true for cash distributions from a Special Needs Trust, as well as that extra $100 from mom & dad every month (because nobody can really live independently on SSI). It is at least possible that many fail to do the required reporting. ABLE accounts are a better, legal way to do this! And there is no reporting requirement!

The most important characteristic of an ABLE account is that it is an exempt asset, and Medicaid and SSI will disregard both the asset and distributions! This is huge! Receiving money from an ABLE account doesn’t count! DSHS will not count either the asset or the expenditure from an ABLE account. With a few exceptions, no other source of income is exempt from being counted, so this is really new and really good.

ABLE account balances also do not affect the asset limit. The asset limit for Medicaid and SSI has been $2,000 since January 1, 1989. Had it risen with inflation, it would be almost $4,000 today. Many clients on Medicaid receive close to, and some receive more than, $2,000 every month in SSDI or other benefits, and keeping assets below $2,000 can be a real problem. So with an ABLE account, we can increase dramatically the amount we can “save” for a person with a disability by using an ABLE account. We used to be able to do this only with a SNT, and that of course still works, and may be still be a better option in specific circumstances; but now we have a new tool.

So where does the money for an ABLE account come from? It does not matter! From the individual, from a parent or other relative, from an inheritance, BINGO or Lotto Ticket, or a personal injury settlement, etc. An ABLE account becomes a place to park money and continue to be eligible to receive benefits.

What are the basics?

Forty nine states and the District of Columbia now offer a plan. Every state is different! How? Fees, investment choices, distribution options, availability to out of state residents, minimum contributions, maximum amount allowed, and estate recovery may all vary from state to state. A good resource is the National ABLE Resource center, https://www.ablenrc.org/. Washington's plan can be accessed at https://www.washingtonstateable.com/

What are the common characteristics in every state?

• $18,000 maximum annual contribution from all sources (as of 1/1/2024).
• Each person can have only one ABLE account.
• Asset grows tax free;
• Not an “entity” so cannot hold physical assets such as a house or car;
• SSI is suspended if the account exceeds $100,000 (at $18,000 per year that is at least seven years away!);
• Disability must have occurred prior to 26^th birthday.
• SSI/SSA/Medicaid recipients, if they meet the onset requirement, are clearly eligible; others who have “significant disabilities” are also eligible.

Advantages of ABLE accounts:

• Easier and less expensive to open and use than a trust;
• Provides tax benefits ;
• The person with a disability can have control over the account;
• Can be a more normalizing experience for the beneficiary; they can buy their own stuff;
• Money from an ABLE account used for housing expenses doesn't reduce SSI benefits.

Advantages of Special Needs Trusts:

• Has no limits on contributions;
• Does not require that your disability began before you turned 26;
• No Medicaid payback if it is a Third Party Trust;(note some states have stated they will not do estate recovery for an ABLE account.)
• The money in a Special Needs Trust does not have to be spent on qualified disability expense, just used “for the benefit” of the beneficiary;
• No maximum amount;
• Can hold vehicles and real property;
• Oversight by Trustee who must approve disbursements.

Many people can benefit from having both an ABLE account and a Special Needs Trust. For small settlements and inheritances, an ABLE account is an excellent alternative to a SNT. For individuals on SSI who are capable of managing at least some money, the ABLE has the potential for significantly increasing their quality of life. And for all persons on Medicaid or SSI, the woefully inadequate limit of $2,000 for savings is now history, at least for those disabled prior to age 26. There is already talk about raising or eliminating this restriction.

Mr. Williams has recorded a YouTube video about Special Needs Trusts & Able Accounts especially for parents and family members of individuals with Developmental Disabilities. He has done these regularly for PC2, a local advocacy and information agency, which is also an excellent resource for all concerns about individuals with a Developmental Disability.