The ABLE Account is one of the most anticipated special needs planning tools of the last decade and is finally up and running in Maryland. On November 28, 2017, Maryland went live with their ABLE accounts. The Achieving a Better Life Experience Act was signed into law by President Obama in 2014. However, since the passage of the law the IRS has had to formulate regulations, the Social Security Administration has had to formulate regulations, states have had to pass legislation and formulate their own regulations, all in order to get the program up and running. So, here we are 3 years later and Maryland is now offering ABLE accounts. ABLE accounts are a unique new tool to assist in planning for those with disabilities.
The able accounts offer a number of advantages.
- The balance of the account is not counted as an asset for Social Security Purposes
- Growth of the account is tax free
- The account can be used for “qualified disability expenses” which includes housing (these payments are not allowed for special needs trusts)
- The beneficiary may set up the account for themselves and contribute their own funds
- Anyone can contribute to the account
All of these advantages make ABLE accounts an attractive option for someone with disabilities to have a cost-effective, relatively simple tool to be able to accumulate some assets without affecting their public benefits. However, there are some limitations
- The beneficiary must have been disabled prior to the age of 26
- Account contributions are limited to $14,000 per year
- Once the balance reaches $100,000 or more, Supplemental Security Income (SSI) payments are suspended (these are automatically reinstate if the balance drops below $100,000, however Medicaid coverage continues
- In Maryland the account must be set up by the beneficiary, a guardian, or power of attorney agent. The parent of a child under 18 may also set up the account
- Any balance at the death of the beneficiary is paid back to the state Medicaid program
These limitations certainly narrow the scope of who can set up an ABLE account, and how much money can be contributed. IF you are looking for a slightly more flexible tool, a special needs trust may still be an option given there is no limit to the assets that can be placed in a special needs trust, as well as no age requirement for the onset of disability.
Whenever you are considering doing any special needs planning, it is important to consult a special needs planning attorney.