The Stephen Beck, Jr. Achieving a Better Life Experience (ABLE) Act, was signed into law by President Obama in December 2014. ABLE updated the Internal Revenue Code to allow eligible individuals with disabilities, and their families, to establish a tax-exempt savings account that provides disbursements of income tax-free funds for “qualified disability expenses,” including education, transportation, housing, obtaining and maintaining employment, personal support services, assistive technology and health and wellness. Money contributed to an ABLE account is generally disregarded, or not countable, when determining eligibility for federal benefit programs, such as Supplemental Security Income (SSI) and Medicaid. ABLE United (www.ableunited.com) is Florida’s ABLE program, which began in July 2016.
In order to establish an ABLE account, the individual with a disability must be a Florida resident. Further, the ABLE Act limits eligibility to individuals who have developed significant disabilities before turning 26 years old. The individual does not have to be under the age of 26 to qualify, as long as there is documentation and/or medical records which prove the onset of the disability before age 26. If the qualifying individual meets the age of onset criteria and is receiving benefits under SSI and/or SSDI they are automatically eligible. Otherwise, the individual must have a condition listed in the “List of Compassionate Allowances Conditions” maintained by the Social Security Administration, certified blindness or have a medically determinable physical or mental impairment.
An ABLE account can be a very helpful tool for some individuals with disabilities, but there are restrictions and limitations for ABLE accounts. An individual may only have one ABLE account and the total annual contributions, by all contributing individuals, including family and friends, is $15,000 (in 2018). This amount changes with the annual gift tax exclusion. For individuals with disabilities who also receive SSI and/or Medicaid, there are further limitations. The first $100,000 in an ABLE account will be exempt from the SSI $2,000 individual resource limit. When an ABLE account exceeds $100,000, however, the beneficiary may be suspended from eligibility for SSI benefits and may no longer receive that monthly income. However, for Medicaid eligibility, the individual can have up to $418,000 (Florida’s limit for 529 Educational Savings Plans). The ABLE account grows tax free provided the funds are used for qualified disability expenses.
It is also important to be aware that Florida Medicaid has a lien on Florida ABLE accounts upon the death of an ABLE beneficiary, similar to a first party Special Needs Trust. However, the Florida legislature took the first steps to amend Florida ABLE statutes and remove Medicaid recovery from ABLE United accounts. This change would treat those with ABLE accounts in the same manner as those without ABLE accounts when it comes to Medicaid recovery. The implementing bill clarifies that any remaining funds in an ABLE account must first be distributed for qualified disability expenses, and then remaining funds can be transferred to the estate of the designated beneficiary. Additionally, Florida’s Medicaid program may not file a claim for Medicaid recovery of funds in an ABLE account. These changes will be in effect from July 2018 – June 2019 and the hope is legislation introduced in the 2019 session will make this change permanent.