On December 19, 2014, Congress passed the Achieving a Better Life Experience (ABLE) Act. The Act amends the Internal Revenue Code to allow families to save private funds to support a person who was disabled before turning 26.
How Does It Work?
ABLE accounts will be like the 529 plans created to save for college tuition. Any individual who is receiving SSI or disability benefits under Social Security will be eligible to use an ABLE account. A beneficiary will not lose his Medicaid benefits based on the assets held in an ABLE account. However, when the beneficiary dies (or is no longer disabled) the ABLE account will be used to pay back any Medicaid he received during his life.
The total annual contribution to an ABLE account is limited to $14,000. Anyone can contribute to the account. The income from the account is not taxed and distributions are not taxed if used for qualified expenses, such as education, housing, transportation, employment training, legal fees and funeral and burial expenses for the disabled individual.
When Can I Start the Process?
Each state will be responsible to create an ABLE program. No accounts can be established until the regulations are finalized. States will begin to accept applications to establish ABLE accounts before the end of 2015.