ABLE accounts are a relatively new planning tool available to individuals with disabilities. The Achieving a Better Life Experience (ABLE) Act, signed by President Obama in 2014, allows individuals who meet certain criteria to open and hold assets in an account that will not be counted as a resource for the purposes of public benefits. At the same time, the account beneficiary has more control and access to the funds than with a traditional special needs trust.
Because ABLE accounts are created under the same IRS regulations that allow for 529 accounts used to fund higher education, they are qualified savings accounts that receive preferred federal tax treatment. In order to take advantage of these incredibly useful savings tools, the individual’s disability must have had its onset prior to age of 26. The disability must also meet the requirements for either the Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) programs and the individual must be receiving those benefits or certify that he or she has the documentation of a physician regarding disability.
Although only 17 states have created ABLE programs so far (see map from the ABLE National Resource Center), this does not mean that you or a loved one is barred from opening an ABLE account if you do not live in one of these states. A person with disabilities may open an account in any state that has an ABLE program allowing out-of-state residents to open ABLE accounts. It is important to note, however, that an individual cannot have more than one ABLE account.
Here are details on the programs of three states that allow out-of-state residents to open accounts:
Michigan launched the MiABLE program on November 1, 2016. The account can be opened by the individual, a parent, an agent under a power of attorney, or a legal guardian. There are five different investment options for MiABLE beneficiaries that vary in degree of risk and in cost. This means that you have the option to grow your money in a way that suits your risk tolerance. Michigan also allows for a state income tax deduction of $5,000 for individuals and $10,000 for joint filers. Another interesting feature of the account is that MiABLE has given beneficiaries the ability to create public profiles to solicit donations from friends, family, and even strangers, similar to the format used for websites like GoFundMe.
Oregon launched its national program called ABLE for All in 2016. The program offers three investment options: Conservative, Moderate and Aggressive. There is also an FDIC-insured cash option that is appropriate for those planning on spending money from the account in the near future. ABLE for All will also soon be launching prepaid cards that beneficiaries can use to access their funds. An interactive website dashboard allows beneficiaries to set savings goals for themselves.
Virginia opened ABLE Now Virginia in 2016 and it is available nationwide to eligible individuals regardless of their state of residency. The account offers an ABLEnow Debit Card that gives individuals immediate access to their account. The first $2,000 deposited in the account is automatically allocated to the FDIC-insured deposit account linked to the card. Like Oregon’s ABLE for All, Virginia’s account offers three investment options — Conservative, Moderate and Aggressive — as well as a money market account that is 100 percent cash and cash equivalents.
These are just three of the ABLE account options available to individuals with disabilities nationwide. It is important to do your research when selecting an account and to make a determination based on what is best for you or your loved one. Your special needs planner can assist in this evaluation process.