The Arc of Illinois is a great resource of information on this new taxation code that will provide options for people with disabilities and their families. Click here to read more about the explanation and need of this critical bill as those with some disabilities, including Fragile X, Down syndrome and autism, may outlive their parents who act as caregivers. The bill was signed by President Obama on December 19, 2014. It is recommended you meet with an attorney, such as Linda Strohschein, well versed in special needs planning. Linda helps families with Advanced Special Needs Planning by providing client focused, experienced counsel for optimal comprehension of how an ABLE account differs from a special needs trust, and what is best for the person with a disability and the family.
“The ABLE Act will change the tax code to allow for tax advantaged savings accounts for qualified individuals with disabilities to save for certain expenses, such as education and transportation. Similar to existing “Section 529” education savings accounts, ABLE accounts will allow individuals and families to save for disability-related expenses to supplement, but not replace, benefits provided through Medicaid, Supplemental Security Income, the beneficiary’s employment, and other sources. If properly managed, funds in an ABLE account will not jeopardize eligibility for critical federal benefits. With a full understanding of account features, individuals and families can use ABLE accounts as another tool in planning for the lifetime needs of an individual with long term disabilities.” The Capitol Insider Blog
Points to consider:
- A person with a disability can only have an ABLE account if they were severely disabled by age 26.
- Each person with a disability can have just one ABLE account, and set up in the state where they live.
- Contributions to an ABLE account may not exceed $14,000 total per year (this figure is indexed to the current maximum annual gift tax exclusion amount, and is expected to change in the future)
- Each state has it’s own maximum size for an ABLE account. This amount will determine eligibility for SSI – but not Medicaid.
- “Qualified disability expenses” paid from an ABLE account will not be subject to income taxation on the interest or gain in value of the ABLE assets, and the expenditure will not be counted as income to the beneficiary. Terms will be defined by the government – expect expenditures to include “education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial expenses.”