Florida Estate Planning and Probate Law Blog focused on recent case law and planning ideas.

THE ABLE ACT (ACHIEVING A BETTER LIFE EXPERIENCE)


 
The Achieving a Better Life Experience (the ABLE Act) was signed into Federal law on December 19, 2014. Each state is responsible to pass legislation to create the vehicle for ABLE accounts to be created and administered. The law creates a new savings vehicle for those individuals suffering with disabilities. The account funds can be utilized for education, medical and dental care, job training, housing, transportation and other expenses.
 
The first $100,000 is disregarded when determining SSI (Social Security Income) eligibility. Without this Act a person receiving Medicaid could only have personal liquid assets of $2,000 or less. Contributions grow tax free and withdrawals for qualified expenses are also tax free.

Eligibility for an account requires an individual to be entitled to Social Security benefits, based on a blindness or disability that occurred before the date on which the individual turned age 26. A beneficiary is limited to one ABLE account and the account must be set up and established in the state in which they live. Account contributions are treated as a completed gift (they are non-deductible cash contributions) and limited to $14,000 per year.

An ABLE Account may be rolled-over tax free from one account to another for the same beneficiary, but only once in a 12 month period. Any amounts remaining in an ABLE Account at the beneficiaries death are subject to a claim from the state for an amount to replace Medicaid payments made by the state.

In contrast, a Special Needs Trust can be established for any age beneficiary and is not subject to this payback provision. There are also no dollar limits that can be contributed or accumulated in a Special Needs Trust.