ABLE Act Enhancements Being Considered

June 28th, 2017 | posted in: Insights, Uncategorized, Wealth Strategies

by: Carter Davenport

The Achieving a Better Life Experience Act, better known as the ABLE Act, is potentially going to receive a face lift. The bill was passed in 2014 and allows family members and guardians to open up a tax-free savings account for children with disabilities under the age of 26 without losing any government benefits, i.e. Medicaid and Supplemental Security Income (SSI).  Before the passage of this bill, individuals could not have more than $2,000 in a savings account without jeopardizing their public benefits.

Family and friends can now contribute up to a total of $14,000 combined per year to the ABLE account. For example, the parents of the beneficiary can contribute $2,000, grandparents can contribute $10,000, and a friend of the family can contribute the remaining $2,000 in that same year.  If the individual with special needs is receiving SSI, then the total balance of the ABLE account is limited to $100,000, in order for SSI benefits to continue.  In addition, the total balance of the ABLE account is subject to limits established by state laws.

The 2014 bill is a great start in allowing individuals with disabilities to accumulate savings that can provide support for services not covered by the government without being disqualified from receiving public benefits. However, there is still more that needs to be done to prevent working age individuals with disabilities from living in poverty.   According to a recent US Census Report, Income and Poverty in the United States, 2015, (http://tinyurl.com/jgwmkty) working age people with disabilities are 2 times more likely to be living in poverty than those without disabilities.  To qualify for Medicaid and SSI, individuals with special needs are required to hold very little in a savings account and show virtually no income which can force those with special needs into living in poverty.

Currently, congress is looking at making some improvements to the 2014 bill. The enhancements being considered are increasing the age limit to 46 for opening ABLE accounts, allowing the rollover of a 529 college savings plan to a 529 ABLE account, and allowing people with disabilities to contribute their work income to the ABLE account on top of the $14,000 per year.  For more information follow the attached link:  http://tinyurl.com/ycrkdnn9