What is an ABLE Account?
An ABLE account is a tax-advantaged investment account designed to help qualified individuals with disabilities, and their families save for disability-related expenses. The amount in this account can be contributed by anyone. Though the entire contributions in this account should not exceed $15,000 in any given tax year. Besides, the amount saved in this account is not taken into consideration when determining eligibility for Supplemental Security Income and Medicaid. One vital fact about this account is that a person can only be the beneficiary of one ABLE account.
Reasons behind Having ABLE Accounts
Several individuals with disabilities along with their families depend upon a variety of public benefits for healthcare, income, food, and housing assistance. Eligibility for many public benefits like Supplemental Security Income and Medicaid require individuals to meet a resource test that limits their eligibility to have more than $2,000 in cash savings, retirement funds, and other items of significant value. Thus, it can be said that to be eligible for these public benefits, individuals with a disability must always remain poor. Therefore, to counter this ABLE account understands the significant costs of living with a disability and offers a savings tool to address it.
Eligibility for ABLE Account
Only individuals with significant disabilities with the onset of disability before they turn 26 years of age are eligible to open an ABLE account. Individuals meeting this age criterion and already receiving benefits under SSI or SSDI automatically become eligible to open an ABLE account. However, individuals who are not receiving SSI or SSDI benefits but still meet the age of onset disability requirement are still eligible to open an ABLE account if they meet Social Security’s definition and criteria and receive a letter of certification from a licensed physician. Individuals should keep in mind that to be eligible for an ABLE account they need not be under the age of 26 years but they must have had onset of disability before their 26th birthday.
Usage of the ABLE Account Funds
ABLE account funds can be used to purchase qualified disability-related expenses. A qualified disability expense is any expense related to the beneficiary’s blindness or disability in maintaining their health, independence, and quality of life. These expenses are related to housing, education, transportation, employment training and support, personal support, healthcare expenses, financial management, administrative services, and other expenses.
What happens to ABLE Account in case of its Beneficiary’s Death
If the beneficiary dies, the state in which the beneficiary lived may file a claim to all or a part of the funds in the account, which they spend on the beneficiary through the state Medicaid program. This is referred to as Medicaid Paycheck provision and the claim could recoup Medicaid-related expenses from the time the account was opened. However, if beneficiaries are not receiving Medicaid services during the time of having an ABLE account, then they are not subjected to the payback rule.