What should you know about ABLE savings accounts for your loved ones with special needs?

special needs trust in PAThere is new legislation that allows for a family that has a loved one with special needs to set up an ABLE Savings Account.  The Stephen J. Beck, Jr. Achieving a Better Life Experience Act (ABLE Act) was signed into law in December 2014.  This law allows states to create their own ABLE programs.  Previously, Special Needs Trusts were the only way a family could save money for a special needs individual without losing eligibility for SSI and Medicaid benefits.  But now with the availability of ABLE Savings accounts, families have another option to save for their disabled loved one’s future.

When the law was first passed by Congress in 2014, ABLE Savings Accounts were only available to in-state residents in those states where the accounts were established. Recently the law was amended and now ABLE Savings accounts are available nationwide.

Pennsylvania passed ABLE legislation on April 18, 2016.  This act is called the Pennsylvania ABLE act, which states that the Treasury Department of the Commonwealth is the agency responsible for creating and regulating the implementation of the act.

ABLE Savings accounts work like 529-college savings accounts.  Earnings and withdrawals are federal and state tax-free.  The savings accounts can be used to pay for medical expenses, education, housing, etc. The ABLE Savings Account fees tend to be lower than the fees associated with setting up and maintaining a special needs trust in Bucks County PA.

Two requirements to open an ABLE Savings Account are: the accounts are only available for individuals who were disabled before the age of 26; and an individual may open only one account for their loved one.  Another stipulation is that the maximum annual contribution is directly related to the federal gift tax exclusion amount, which is currently $14,000.   If the ABLE account’s balance were to exceed one hundred thousand dollars, the extra amount would be considered countable for SSI eligibility, but it would not affect the MA eligibility.

The Federal ABLE law also includes a “payback provision,” which states that upon the death of the ABLE beneficiary, Medical Assistance could submit claims for payment of services from when the ABLE account was established.  There is still much work that needs to be done on the Federal ABLE Act regulations and the individual state regulations for this to be a viable option for families.

For more information on ABLE accounts in the state you reside in, check out The Arc, a disability non-profit website for a list of emerging ABLE Savings account in your area.  Also, for more detailed information contact the Special Needs Planning attorneys at Newman Elder Law.

Hopefully with the advent of ABLE Savings accounts, there will be more options available to you for financially securing your loved one’s future.

Information courtesy of Forbes.com

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