Kathryn J. Bryan, Ph.D., Skylight Financial Group
What is the ABLE ACT?
The Achieving a Better Life Experience Act of 2014 (the ABLE Act) was signed into law as part of the December 2014 Tax extender package, which allows states to create a qualified ABLE program. Ohio has since passed and implemented the ability for individuals to sign up for an ABLE account utilizing the STABLE accounts (www.stableaccounts.com). The ABLE Act allows accounts to be established for qualifying individuals that can supplement their Medicaid and Social Security income (SSI) benefits without disqualifying them from receiving benefits.
Who can sign up for the ABLE account?
Individual’s who are eligible for social security disability (SSDI) or SSI and/or have a disability certification filed by the parent or guardian that states that the individual has a medically determinable physical or mental impairment that results in marked and severe functional limitations. The disability or blindness must have occurred before the individual attains age 26.
How is the ABLE account taxed?
If the ABLE account distributions do not exceed the disability expenses, none of the distribution is includible in income. If the distributions do exceed the designated beneficiary’s qualified disability expenses, only a portion of the distribution is not taxable.
How do distributions from the ABLE account impact SSI and Medicaid that the individual will receive or is already receiving?
ABLE account balances, contributions, and distributions for qualified disability expenses are not considered in determining eligibility for means-tested federal benefit programs or the amount of the benefits under the programs, therefore the individual will not lose SSI benefits due to funds that are held in this account. There are two exceptions where ABLE act funds can impact SSI benefits. First, distributions from the ABLE account for housing expenses are considered income in determining eligibility for SSI and/or if the ABLE account balance exceeds $100,000 the excess is considered a resource of the designated beneficiary and will suspend the SSI benefits until the balance decreases below the $100,000. This however would not impact Medicaid eligibility. Total contributions from all contributions for the ABLE account per individual are limited to the gift tax annual exclusion ($14,000 for 2016).
How will this help my family?
The ABLE accounts allow family members and individuals to contribute to an account that can provide funds needed for qualified disability expenses such as education, housing, transportation, employment training, health, personal services, financial services, without disqualifying them from SSI, SSDI, or Medicaid. This is not to take place of special needs trust if one is needed for the family but can help complement the Special needs trust and help the individual have more flexibility with their finances.
The information provided is not written or intended as specific tax or legal advice. We are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.