Did you know? ABLE Accounts for Disabled People

ABLE Accounts are savings accounts for people with disabilities and their families. The money accumulated in ABLE Accounts can be used to pay for qualified disability expenses. Most people with significant disabilities rely on Medicaid and or Social Security benefits. Maintaining eligibility for these benefits has limited a disabled person’s ability to save money for the future. ABLE Accounts are hoped to enable savings for individuals with disabilities without affecting their benefits.

To be eligible to own an ABLE Account the person had to have a disabling condition prior to the age of 26. In addition, you either have to be receiving benefits under SSI or SSD or you must meet the statutory criteria for a disability and have a letter from a doctor attesting to the disability. A designated beneficiary can only have one ABLE Account. Contributions to an ABLE Account can only be in cash. Any person can contribute to an ABLE Account. The definition of a person includes a trust, so a trust can contribute to an ABLE Account. Total contributions are limited to the gift tax exclusion which in 2018, is $15,000.00 per year. The total amount in the ABLE Account cannot exceed $100,000 in order to preserve eligibility to Social Security disability benefits.

The only people who can open an ABLE Account are the eligible individual, as long as they have capacity, a parent or legal guardian, or a Power of Attorney. The funds in the ABLE Account can be used for any qualified disability expense. The following categories are considered qualified disability expenses: education, housing, transportation, employment training and support, assistive technology, personal support services, health, financial management, legal fees, and funeral and burial expenses. It is strongly recommended that detailed records be kept as to the use of the ABLE funds in order to show that the money was used for a qualified disability expense. In addition records need to be maintained showing the source of the funds in the ABLE Account.  Maintaining these records and documenting deposits and withdrawals is crucial.

Money left in an ABLE Account upon the beneficiary’s passing is subject to Medicaid pay back at this time. This means if you utilized Medicaid after the opening of your ABLE Account, the state can attempt repayment for funds expended through Medicaid by going after money left in your ABLE Account after death. This is in contrast to a Special Needs Trust that is funded by third party funds which is not subject to Medicaid pay back and can be passed on to other beneficiaries.

ABLE Accounts are another tool to be considered when planning for someone with special needs. It should be considered along with a Trust as the rules for each are different and each has distinct advantages. Life’s WORC Trust Services is available to assist you in planning for your loved ones financial future. As always you should consult an attorney to review your individual circumstances to determine what is best for you or your family. For more information visit the the New York’s ABLE website.