Individuals with disabled children get a new vehicle that will help in covering certain expenses. This new savings account was created when the “Achieving a Better Life Experience” (ABLE) Act was signed into federal law on December 19, 2014. While the federal government has authorized the creation of ABLE accounts, individual states have to implement their own plans.
Ohio House Bill 155 was recently passed to implement the federal law in Ohio. The Office of the Treasurer is responsible for implementing ABLE in Ohio. Once implemented, qualified individuals may be the beneficiaries of these tax-advantaged accounts.
To be eligible, the beneficiary must have been blind or disabled before age 26 and meet other criteria for documenting a severe disability. Individuals can contribute up to $14,000 in cash — the current annual gift exclusion amount — in a given taxable year into one of these ABLE accounts. Earnings in the ABLE account remain tax-free so long as distributions are made for “qualified disability expenses,” as defined in the federal ABLE Act.
These tax-advantaged savings accounts give persons with disabilities and their families the opportunity to save for disability-related expenses without losing eligibility for certain public benefits. An ABLE account beneficiary who also receives Supplemental Security Income (SSI) will continue to be eligible for SSI until the account balance exceeds $100,000. Once the account has more than $100,000, then monthly SSI benefits will be placed in suspension. However, once the ABLE account drops below $100,000, then SSI benefits may resume.
Also, be cognizant of the Medicaid payback provision. The estates of disabled persons who died with money in their ABLE accounts would be subject to Medicaid claims.
ABLE accounts are another tool people may consider when providing for individuals with disabilities.