What is an ABLE Account?
ABLE stands for Achieving a Better Life Experience. An ABLE account is an account for the benefit of a designated beneficiary. The designated beneficiary must be blind or disabled by a condition that began before the individuals 26th birthday.
Does the ABLE Account have to have been set up before the individual’s 26th birthday?
No. It can be set up at any time, as long as the individual’s blindess or disability began before her 26th birthday.
Does the designated beneficiary have to be receiving SSI or SSD in order to be able to open an ABLE Account?
No, as long as a physician writes a letter attesting to the fact that the individual is be blind or disabled by a condition that began before the individuals 26th birthday to the degree that he would now qualify for SSI or SSD.
Can I open an ABLE Account at a bank or brokerage?
No. An ABLE program can be established and maintained by a State or a State agency directly or by contracting with a private company (an instrumentality of the State). An eligible individual can open an ABLE account through the ABLE program in any State.
An eligible individual can be the designated beneficiary of only one ABLE account, which must be administered by a qualified ABLE program.
Does Arizona have an ABLE program?
Arizona does have an ABLE program. You can visit the website and open an account at Arizona ABLE. Most states that have established ABLE Account programs allow out of state residents to open ABLE accounts. An exception is Florida. A disabled person cannot have more than one ABLE Account.
What other States have ABLE programs currently (as of August 23, 2017?
- District of Columbia
- New York
- North Carolina
- Rhode Island
Who is considered the owner of the ABLE account?
The designated beneficiary.
Who can contribute to the ABLE Account?
How much can they contribute?
The account cannot receive a total of more than $14,000 from all contributors in 2018. That number changes slightly every year, keyed to the maximum federal gift tax exclusion amount.
Can the blind or disabled person contribute to her own ABLE account?
Yes. If you are an SSI or Medicaid recipient, and your grandmother leaves you $10,000 in her will, you will lose your SSI (and might, depending on your state, lose Medicaid eligibility as well). Same if you are slightly injured in a car collision and your net settlement is $12,000.
The ABLE Act opens up a new possibility. You might be able to move your small inheritance or personal injury settlement into a new ABLE Act account, and continue your benefits uninterrupted. That way you can figure out how to spend the money over the next few months or years, rather than having to get it spent down within the next two or three weeks.
Note, though, that this only works for amounts under the $14,000 annual exclusion amount – at least in most cases. If the money arrives in, say, December, it might be possible to spread contributions across two calendar years. There might be other opportunities to spread payments out to fully utilize the ABLE Act. It will be very difficult, however, to handle a $50,000 inheritance or a $100,000 personal injury settlement this way.
What happens if the ABLE Account comes to total more than $100,000?
A balance of up to $100,000 does not count for SSI purposes. SSI counts the amount by which an ABLE account balance exceeds $100,000 as a countable resource of the designated beneficiary. Social Security has promulgated a rule for indefinite suspension of the designated beneficiary as long as the amount exceeds $100,000, but the individual retains continued eligibility for Medical Assistance through Medicaid. SI 01130.740 Once the balance is brought down to no more than $100,000, SSI eligibility is restored.
Can the ABLE Account beneficiary make withdrawals from the account?
Yes. The withdrawals have to be related to the blindness or disability of the designated beneficiary and for her benefit. They are called QDE which stands for Qualified Disability Expenses. A list of QDE is as follows:
- Employment training and support
- Assistive technology and related services
- Prevention and wellness
- Financial management and administrative services
- Legal fees;
- Expenses for ABLE account oversight and monitoring
- Funeral and burial
- Basic living expenses
What kind of housing expenses can ABLE funds be spent on?
Per Social Security POMS SI 01130.740:
- Mortgage (including property insurance required by the mortgage holder);
- Real property taxes
- Heating fuel
- Garbage removal
Why would family members be interested in contributing to the disabled beneficiary’s ABLE Account?
One answer is that funds in the ABLE account can give the account beneficiary a feeling of autonomy. A grandparent could gift an amount to a disabled grandchild, knowing all the while that the gift reduces dollar for dollar the amount of the grandchild’s SSI benefit for that month. But when the grandparent gifts the money to an ABLE account, and the grandchild withdraws it to spend on Qualified Disability Expenditures, there is no reduction in the grandchild’s SSI.
Does an ABLE Account have an effect on ISAM (In Kind Support and Maintenance)?
Imagine that your child does not have an ABLE Account. He wants his own apartment, but he cannot afford it on his meager SSI. So you pay $1200 per month to supplement the food, rent, mortgage, or other things like electricity and heating fuel. The Social Security Administration counts this type of assistance as “in-kind support and maintenance”. The Social Security Administration is authorized to reduce the child’s SSI benefit by an amount that is called Presumed Maximum Value or “PMV”. The PMV is 1/3 of the Federal Benefit Rate plus 20%. Here is how the SSI is reduced:
1. The SSI Federal Benefit Rate is $735.00
2. One-third of the SSI Federal Benefit Rate of $735 is $245.
3. $245 (1/3 of the Federal Benefit Rate)
+$20.00 (from the PMV rule)
=$265 (the PMV of in-kind support and maintenance)
4. $265 (the PMV of in-kind support and maintenance)
-20.00 (general income exclusion)
= $245 (the amount of the reduction due to in-kind support and maintenance)
5. $735 (Federal Benefit Rate)<>
-$245 (reduction due to in-kind support and maintenance)
= $490 (your SSI benefit amount)
So then let’s imagine that your child has an ABLE account, and you make an annual contribution of $14,000 to it. Your child can use the funds to pay for any housing expenses related to their disability, which includes Real property taxes, Rent, Heating fuel, Gas, Electricity, Water;Sewer, or, Garbage removal, but there is no $245/month deduction for In-Kind Support and Maintenance.
Should I still create a Special Needs Trust for my child or grandchild?
An ABLE Account is not a substitute for a Special Needs Trust. But you should put language in your Special Needs Trust that allows the trustee to make contributions to the ABLE Account of your child or grandchild. If you have not already done so, you can easily amend your special needs trust in many cases.
What happens when the designated beneficiary of an ABLE Account dies?
Upon the death of an ABLE Act participant, every dollar remaining in the account – including gifts from family members, and earnings in the account itself – must be paid to the state Medicaid agency to repay costs of care received by the participant during life. If the account should grow large enough to fully repay that Medicaid cost, any remaining funds can go to family members or other beneficiaries.
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