Congress passed a law creating a new type of savings plan for your loved one who has a severe disability. The “Achieving a Better Life Experience (ABLE) Act” was “designed to provide new opportunities for individuals and families to save for the purpose of supporting individuals with disabilities in maintaining their health and independence.”
Beginning January 1, 2015, the ABLE Act authorizes each state to establish and operate ABLE programs, similar to the college planning 529 account. The program allows:
- A single ABLE account to be set up for any “eligible” state resident. “Eligible individuals must be severely disabled before turning age 26, based on marked and severe functional limitation or receipt of benefits under the SSI or Disability Insurance programs.”
- An annual contribution to the ABLE savings account to be made, from all individuals, equal to the annual gift tax exclusion amount (in 2014-2015 this is $14,000, but is indexed for inflation).
- Distributions are taken directly from the ABLE account and can be used for “qualified expenses.” These are defined as expenses related to the individual’s disability, such as:
- assistive technology
- personal support
- related services and expenses
- Any income earned by these accounts would not be taxed, nor would distributions made from them, so long as the distribution is used for qualified expenses.
- The accounts will not be considered a resource when determining eligibility for government benefits (up to $100,000 of the ABLE account value). However, distributions for housing expenses would still be considered when SSI benefits are calculated.
An ABLE account provides a way to help provide a better quality of life for a loved one with a severe disability, and does not jeopardize government benefits being received. Under this new legislation, each state is enabled to create an ABLE 529 account.
The ABLE National Resource Center (ANRC), founded and managed by the National Disability Institute (NDI), provides information concerning the benefits of an ABLE account. ABLE accounts are tax-advantaged savings accounts for individuals with disabilities and their families, to be created as a result of the passage of the Stephen Beck Jr., Achieving a Better Life Experience (ABLE) Act of 2014. The ANRC aims to educate individuals with disabilities and their families and other stakeholders about ABLE’s potential positive impact on the lives of millions of Americans with disabilities.