Last week, Congress passed the Achieving a Better Life Experience (ABLE) Act, which creates tax-favored accounts for children and adults whose disability occurred before age 26.
The ABLE Act allows these tax-favored accounts to receive up to the annual gift tax exemption (currently $14,000 per year). Beneficiaries are restricted to one account, but anyone could contribute to their account. Modeled after 529 college savings accounts, ABLE account programs will need to be implemented by the states
Assets in an ABLE account and distributions from the account for qualified disability expenses would be disregarded when determining the qualified beneficiary’s eligibility for most federal means-tested benefits, including Medicaid. For SSI [Supplemental Security Income] only ,the first $100,000 in each ABLE account would be disregarded.
Since the ABLE Act applies to those who become disabled prior to age 26, in many cases, a special needs trust may still be needed to preserve public benefits. The President is expected to sign the ABLE Act legislation into law in early 2015. Please feel free to contact our office for more information on the ABLE Act may benefit you.