Parents wanting to contribute funds to benefit their disabled children or provide some additional assistance on their death have some options they did not possess even a few years ago. In 2014, one of these alternatives, known as an ABLE account, came into being by federal law. There are limitations but, for those who qualify, ABLE accounts could provide a less complicated although
potentially more limited alternative to the process of establishing and maintaining a supplemental needs trust.
The ABLE Act, otherwise known as “Achieving a Better Life Experience,” is a law that allows States to establish programs modeled after 529 plans but for disabled individuals. One catch is that, for a disabled individual to qualify his or her disability must have occurred prior to reaching the age of 26. The states set up their own plans and Pennsylvania’s plan is operational now.
These accounts are especially relevant for those developmentally disabled individuals who want to be able to save but are, by definition, limited both in their earning potential and with their limited income. Federal income and asset guidelines are especially strict for those who receive SSI due to their disability and limited income. This allows some additional flexibility.
Anyone can contribute to an ABLE account but it must be established and owned by the disabled individual or a parent or fiduciary acting on behalf of the disabled individual if that person is a minor or unable to act. The maximum total contribution from all sources including the disabled individual now is $15,000 per year although with recent changes in the tax law some additions from employment may be allowed. It is an attempt to provide sustainable funding and options for those with disabilities through accounts to which both disabled individuals and others can contribute recognizing that disabled individuals who receive SSI and Medicaid would not generally own liquid assets in excess of $2,000 in their own name.
ABLE is a new tool in a toolbox that currently includes third party, pooled and D4A supplemental needs trusts. Here is what you need to know.
There is much more to learn about these accounts but the law is one step in the right direction.
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.