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
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
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
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.
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