The Stephen Beck Jr. Achieving a Better Life Experience (ABLE) Act, effective December 19, 2014, created another tool for planning for the financial well-being of a person with a disability. This law permits each state to establish and maintain a tax favored savings program, akin to a college savings plan. Contributions to an ABLE account are not deemed taxable transfers, earnings inside the ABLE account are exempt from federal income tax, and distributions for Qualified Disability Expenses (QDE) are not subject to federal income tax. Importantly, contributions to the ABLE account, the ABLE account itself, and distributions for QDE will not impact eligibility for most state and federal public benefit programs, including Medicaid, Supplemental Security Income (SSI), and Section 8 subsidized housing.
While the final regulations present some clarity in many respects, they still leave some questions open for trustees of an SNT who may wish to make annual contributions to an ABLE account. Consultation with a special needs practitioner about the utility, advantages, and potential pitfalls of these accounts in light of the final regulations can help the account owner, the account owner’s family and trustees of trusts for the account owners benefit determine if and how an ABLE account can be beneficial in their circumstances.
