Achieving a Better Life Experience (ABLE) Accounts

Posted February 17, 2017 by Premier Disability Services, LLC® In late 2014, after nearly a decade of lobbying from disability advocacy groups, Congress passed the Achieving a Better Life Experience (ABLE) Act, creating a tax-advantaged account for people with disabilities. Money in an ABLE account grows and can be spent tax-free on qualified expenses such as medical treatment, transportation, housing, education and assistive technology.

Prior to the ABLE Act of 2014, Americans with disabilities who had more $2,000 in their name would lose eligibility for government benefits such as Medicaid coverage or Supplemental Security Income. The total annual contribution limit for an ABLE Account is $14,000, in keeping with the federal gift tax exclusion limit.

Last year, Ohio became the first state to offer ABLE accounts. Currently, the states of Florida, Kentucky, Michigan, Nebraska, Ohio, Oregon, Tennessee and Virginia offer ABLE accounts, with programs launching in several states later this year. A consortium of nine states, including Alaska, Illinois, Iowa, Kansas, Minnesota, Missouri, Nevada, Pennsylvania and Rhode Island, are working together to make ABLE accounts available to the public.

To qualify, the beneficiary of an ABLE account must have become blind or disabled before age 26 and meet other criteria for documenting a severe disability. The required age of onset may change in the future, however. “There’s lot of activity and support that would take it from [age] 26 to 46,” says Mary Morris, CEO of Virginia529 College Savings Plan, which launched Virginia’s ABLE plan last month.

Additionally, fees on ABLE accounts may vary by state. For instance, Ohio charges a $2.50 per month maintenance fee to Ohio residents and $5 to residents of other states. In contrast, Virginia’s monthly fee is $3.25 per month regardless of residency, and that fee is waived if you keep an average daily balance of $10,000 in your account. The maintenance fees cover the cost of administering the program, and fees for the underlying investments are an additional cost.

While ABLE accounts have the potential to help millions of Americans with disabilities, some people may still choose to set up a special needs trust, sometimes called a supplemental needs trust, or take other planning steps as well.