Disability Planning: ABLE Accounts

The Minnesota ABLE (Achieving a Better Life Experience) Act was passed in 2015. The ABLE Act allows individuals disabled prior to age 26 to create tax-deferred savings and investment accounts.

In order to be eligible for an ABLE account, a person must be entitled to receive benefits (SSI or SSDI) under Title II or XVI of the Social Security Act, and such disability must have occurred before the date on which the individual turned age 26.

Anyone can establish an ABLE Account, including the individual with a disability. This is a great planning tool because unlike other disability planning options, an ABLE Account allows the disabled individual to have access to and manage their own account.

A disabled individual can only have one ABLE Account. Contributions can be made to the account by anyone, but cannot exceed $15,000.00 per year, unless the individual has a job. If the disabled individual is employed, they can save an additional $12,140.00 a year, for a total savings of $27,140.00 each year. The account balance is excluded up to $100,000.00 for SSI eligibility and $350,000.00 for Medical Assistance eligibility.

Distributions will not be treated as income for eligibility or income tax purposes, so long as they are made for “qualified disability expenses.” These expenses include:

  • 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

Upon the death of the disabled individual, any amount remaining in the account is required to be distributed to any State filing a claim for the total medical assistance paid on behalf of the disabled individual.

When it comes to disability planning, ABLE Accounts are a very beneficial tool. Examples of when an ABLE Account may be used are:

  • In correlation with Special Needs Trusts to provide the beneficiary with direct access to funds.
  • To provide the disabled individual with control of a direct spending account.
  • To provide the disabled individual with an inexpensive way to preserve a small amount of assets when a Special Needs Trust or Supplemental Needs Trust would not be cost effective.
  • To teach disabled individuals transitioning from childhood to adulthood how to use and manage financial resources.

A comprehensive approach to estate planning requires careful attention to detail and an understanding of each client’s individual situations, especially when planning for a child with special needs. Our attorneys are here to discuss your estate planning needs. Contact our office or book an appointment online to schedule an initial consultation.

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