In late December 2014, Congress passed The Achieving Better Life Experience (ABLE) Act. The ABLE Act allows people with disabilities to set aside up to $14,000 a year in tax-free savings accounts without affecting their eligibility for government benefits. The purpose of an ABLE account is to use such funds to supplement an individual’s public benefits for “qualified disability expenses,” such as medical and dental care, education, employment training, housing, and transportation.
The ABLE account is modeled after 529 Education Savings Plans and share the ability to have choice of investment strategies and no tax on income earned by accounts. However, contributions to ABLE accounts are not tax deductible.
Eligibility for ABLE accounts are limited to those individuals with “significant disabilities” with an age of onset of disability before 26 years of age. If the individual meets these requirements and is also receiving benefits under SSI or SSDI, the individual is automatically eligible to establish an ABLE account. If an individual is not receiving such benefits, he or she can still be eligible through a certification of disability process.
The statute does not define a maximum limit to an ABLE account and instead leaves such limitation up to individual states. For individuals who are recipients of SSI, however, the ABLE Act does set a maximum account value of $100,000 in order to continue to receive SSI. Upon a qualified beneficiary’s passing, assets remaining in an ABLE account are reimbursed to any State Medicaid plan that provided assistance from the day the ABLE account was established.=
Although the ABLE Act was passed late last year, implementation of the law has progressed slowly. In June, the IRS published proposed ABLE regulations. The regulations added some needed detail to the law, but left many questions unanswered by delegating most details to the individual states. The comment period for these regulations will end in September with a hearing scheduled in October. Even after final treasury regulations, the State of Indiana must pass its own legislation authorizing ABLE accounts. No legislation was introduced during the 2015 session of the Indiana General Assembly.
We will post updates regarding the implementation of ABLE legislation in Indiana as they occur.
Jeff is Certified as an Elder Law Attorney (CELA) by the National Elder Law Foundation, a distinction held by only a handful of lawyers in Indiana. For almost 20 years, he has focused on elder law, estate planning, long-term care planning, Medicaid planning, Veterans Affairs benefits planning, special needs planning, guardianships, and estate administration.