The Achieving a Better Life Experience (ABLE) Act, passed by Congress on December 16, 2014, allows tax-deferred savings accounts for people who became disabled prior to age 26. ABLE accounts are similar to college savings accounts and are found in section 529A of the Internal Revenue Code. ABLE accounts will offer a simple way to accumulate funds belonging to the individual with disabilities, but they are not right for every situation.

Eligibility: The beneficiary of an ABLE account may be any age, but his or her disability must have begun prior to age 26. The definition of disability is the same as the Social Security definition.

Benefits: Each individual may be the beneficiary of only one ABLE account. Up to $100,000 in an ABLE account is disregarded when determining eligibility for Supplemental Security Income (SSI). If the amount in the account exceeds $100,000, SSI payments will be suspended, but eligibility is not lost. All funds in the account are disregarded for Medicaid eligibility.

Payback Provision: Any funds remaining in the ABLE account will be paid to Medicaid upon the death of the beneficiary or when he or she is no longer disabled. For this reason, ABLE accounts are not the best way for family members to give money to a relative with disabilities. Special needs trusts funded by family members do not disrupt SSI or Medicaid benefits and do not require reimbursement to the state upon the beneficiary's death. ABLE accounts are a useful way for individuals with disabilities to save their own money without losing benefits.

Tax Details: Contributions to an ABLE account are not deductible. The account can receive up to the annual gift tax exemption (now $14,000) each year. Funds in an ABLE account grow free from federal income tax and remain tax-free if spent on qualified disability services. The maximum that can be held in an ABLE account will be the same as the state's maximum for college savings plans. Distributions from the accounts may be partially taxable and subject to a penalty if they exceed the beneficiary's qualified disability expenses for the year.

Withdrawals from ABLE accounts: The funds can be used for "Qualified disability expenses" which means any expenses related to the eligible individual's blindness or disability, including: education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial expenses, and other expenses as may be provided in IRS regulations.

Availability: The IRS issued proposed regulations on June 19, 2015. The ABLE account must be opened through a state program in the beneficiary's state of residence. Virginia was the first state to authorize ABLE accounts. The program will be administered by Virginia529 and accounts may be available for Virginia residents early in 2016. Maryland enacted legislation on April 15, 2015 to begin implementation of the Maryland ABLE Program.

Find out how an ABLE account fits into your planning. Attorneys Jean Galloway Ball and Loretta Morris Williams can assist your family with special needs planning. Both are certified in elder law by the National Elder Law Foundation and members of the Academy of Special Needs Planners. Both are AV rated by Martindale and listed in SuperLawyers..

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