ABLE (Achieving a Better Life Experience) accounts allow individuals with disabilities to save in a tax-advantaged account without jeopardizing eligibility for Medicaid or other federal benefits. Funds in an ABLE account may be used only for qualified disability-related expenses and as such, earnings in the account are tax-free. The maximum annual contribution is $15,000. The account owner is also the beneficiary. Thanks to ABLE, special needs individuals capable of earning money are no longer incentivized to remain impoverished, since having more than $2,000 in countable resources will not terminate their vital federal benefits.
There have been two positive developments regarding ABLE accounts in recent months:
- Beginning July 2018 and continuing through June 2019, Medicaid will not be permitted to seek recovery from funds in a deceased beneficiary’s ABLE account. Therefore, funds can go to the beneficiary’s estate and be distributed according to the beneficiary’s estate plan. Special needs advocates are hopeful that the Florida legislature will make the rule permanent in its next session.
- The 2017 Tax Cuts and Job Act has also impacted ABLE accounts. A 529 college savings plan may now be rolled over to an ABLE account. The rollover may be taken from the 529 plan of the ABLE beneficiary, or from the 529 plan of a family member. The amount rolled over counts towards the maximum $15,000 annual contribution. Yet another positive development for ABLE account beneficiaries: there are now certain circumstances under which more than $15,000 can be contributed annually. For more information on this and other ABLE-related developments, check out ABLE United, the administrator for Florida’s program. Florida is in the process of amending its rules to conform with federal law. law.
Despite the availability of ABLE accounts, parents who are planning for their special needs child should not consider an ABLE account to be a substitute for a Special Needs Trust. The Special Needs Trust has no cap on the funds it can hold, and there are no dollar limits on contributions. A Special Needs Trust can be set up regardless of the age of the beneficiary, whereas an ABLE account is available only for those who have developed a disability by the age of 26.