In order to qualify for certain need based federal and state benefits in connection with a significant disability, individuals typically cannot have assets exceeding $2,000.00. While some assets are exempt from this requirement, the restriction often creates a barrier to save for those who need savings the most.
The Federal Achieving a Better Life Experience Act (ABLE) was enacted on December 19, 2014 to address this concern. The law creates a new option for eligible disabled individuals to save money in a tax deferred account for qualified expenses while still receiving federal public benefits. Each state was tasked with the job of structuring and implementing the program. In 2016, Maryland passed legislation creating the Maryland Able Program. The program is administered by the Maryland 529 Board and is slated to be online this fall.
While many details are still forthcoming, here is what we know so far:
Eligibility: Individuals with significant disabilities with onset prior to age 26 either qualified for SSI/SSDI or able to demonstrate significant functional limitations as certified by a licensed physician.
Contributions: $14,000.00 annually from all sources not to exceed a maximum value of $350,000.00, though further restrictions for SSI recipients. MD permits an annual income deduction of up to $2,500.00.
Qualified Expenses: Withdraws from accounts are tax-free as long as they are used for qualified expenses including, education, housing, transportation, health, and funeral expenses.
Benefits: Disabled Individuals can accumulate more than $2,000.00 in assets without jeopardizing SSI benefits. Disabled individuals may open and manage their own account.
Challenges: Fee structure, penalty at closing if monies are not spent down, funds remaining at death must be used to reimburse the government for Medicaid related Services.
The Bottom Line: The ABLE account is a valuable tool to provide supplemental care for individuals with disabilities without jeopardizing eligibility for state and federal benefits which are crucial to care. Such accounts can be used along with Special Needs Trusts to enhance the quality of life for disabled individuals.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
