ABLE Act allows people with disabilities to save and still keep government benefits

The recently passed ABLE Act ("Achieving a Better Life Experience") amends section 529 of the IRS code, allowing people with disabilities to save for the future and remain eligible for means-tested federal benefits. Prior to passage, special needs individuals who accumulated over $2,000 in assets would lost vital benefits such as Medicaid and SSI. Under the new ABLE act, these people will no longer be forced to keep themselves effectively impoverished.

The law allows for the establishment of tax-advantaged savings accounts for the benefit of a disabled individual. The funds in an ABLE account, just like the funds in a Special Needs Trust, may be used only for those services and items not provided by the government, for example, special therapies, housing, transportation, job training, assistive technologies, etc. Any number of people may contribute to the account, but a disabled individual may have only one such account. The accounts do have certain limitations, though:

• Any amount in excess of $100,000 in the account may cause a reduction in government benefits.

• No more than $14,000 may be deposited into the account annually.

• The beneficiary's disability must have developed before the beneficiary reached the age of 26.

• Upon the death of the beneficiary, the funds in the account must be used to repay Medicaid.

Given its limitations, the ABLE account can serve as an adjunct to, rather than a substitute, for a special needs trust or pooled trust. 

The accounts will become available when each state works out its administrative apparatus to comply with the new law.