Planning for Life

When to Use an ABLE Account

Posted by Harry S. Margolis on January 29, 2019

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By Harry S. Margolis

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ABLE accounts were created by the Achieving a Better Life Experience Act of 2014 as an alternative to special needs trusts and to share the benefits of 529 plans for people who are unlikely to pursue higher education. They only go part way towards those goals but nevertheless can be very useful in providing flexibility around very strict public benefit rules, especially those of the Supplemental Security Income (SSI) program.

 The Rules
A qualified ABLE account will not be counted against the asset or income limits for SSI, subsidized housing, food stamps or MassHealth as long as it meets the following requirements:

  • The beneficiary must have become disabled before age 26.(This is the biggest restriction in terms of the benefits of ABLE accounts extending to a larger group of Americans with disabilities.)
  • He may have only one ABLE account.
  • It may receive no more than $15,000 a year.
  • It may not exceed $100,000.
  • Expenditures must only be for a list of qualified purposes, essentially living expenses.

The Benefits

SSI has had the same $2,000 asset limit for 30 years and every dollar of income received by the SSI beneficiary (including gifts) must be offset by a dollar reduction in SSI benefits. The ABLE account provides a huge safety valve for these rules. The SSI beneficiary can now have up to $100,000 in an account she can manage herself (though given the $15,000 annual contribution restriction, it's the rare account that will grow to this level).

In addition, a family member or special needs trust can now contribute income to the ABLE account that the beneficiary can use for her needs as she wishes. For instance, a special needs trust may deposit $1,000 a month into the ABLE account without affecting the beneficiary's SSI eligibility or eligibility for other benefits. This can ease up the burden for trustees and family members who previously had to go through significant efforts to pay expenses for the beneficiary rather than giving money to her directly. For instance, the SSI rules permit a family member to pay for a haircut, but not to give the beneficiary the money to pay for the haircut herself.

ABLE accounts, like 529 accounts for college expenses, are tax free as long as the funds are used for qualified expenses, but this is really a very small benefit. ABLE accounts typically do not hold significant amounts for significant periods so the tax-free growth of investments is virtually nonexistent.

More Information

Topics: Special Needs Trust, special needs planning, ABLE Accounts, Attainable Savings Plan

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