Help for People with Disabilities
Federal legislation adopted in 2015 allows people with disabilities who became disabled before they turned 26 to set aside up to $14,000 a year in tax-free savings accounts without affecting their eligibility for government benefits. Generally a disabled person cannot have assets worth more than $2,000 without forfeiting eligibility for government programs like Medicaid and Supplemental Security Income (SSI).
Under the Achieving a Better Life Experience (ABLE) Act, the new tax-free savings accounts can be used to pay for qualifying expenses such as the costs of treating the disability or for education, housing and health care, among other things. Now having an ABLE account will not compromise the individual’s ability to qualify for benefits like SSI or Medicaid as long as the account balance does not exceed $100,000.
ABLE accounts may be used to pay a variety of expenses related to maintaining the disabled individual’s health, independence and quality of life. Examples of qualified disability expenses include the following: education, housing, transportation, employment training and support, assistive technology and related services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial, and basic living expenses.
Some 30 states, including Nebraska, have set up programs for families to invest in the ABLE accounts. The Nebraska plan offers four investment options, based upon the individual’s objectives and risk tolerance. These accounts are one more tool for families of people with special needs to use in order to protect their loved ones’ valuable benefits while enhancing their quality of life.
Because the accounts can hold a maximum of $100,000 without negative repercussions and since they apply only to people who became disabled when they were young, most families of people with disabilities will still need to consider setting up a traditional special needs trust if they want to properly care for their relative with special needs. These trusts can also be drafted to protect the trust assets from Medicaid estate recovery if they are funded with money from family members and not the trust beneficiary.
Although it may be easy to set up an ABLE account, there are many hidden pitfalls associated with spending the funds in the accounts, both for the beneficiary and for her family members. Therefore, it is imperative that anyone thinking about establishing an ABLE account speak with her special needs planner first, in order to assure that all of the pieces of the special needs plan properly align with the ABLE account.