You may be familiar with Ohio’s “529 Plan” savings accounts that help families set aside money for future college costs. The federal ABLE Act, signed into law in December 2014, provides a similar savings account opportunity for people with disabilities and their families. In Ohio, these accounts are known as “STABLE” accounts.
Q: What does the ABLE Act do?
A: Like the 529 Plan, the ABLE Act falls under Section 529 of the Internal Revenue Code. The Act allows people with disabilities and their families to save money in a special savings account. Earnings on an ABLE account are not taxed, and account funds are generally not considered assets for the supplemental security income (SSI) program and Medicaid. This is important for those with disabilities, who can lose SSI or Medicaid benefits if they have too much (more than $2,000) in resources.
Q: Who is eligible for an account?
A: To take advantage of the ABLE Act, you must have significant disabilities that began before age 26. (You do not need to be under age 26 to be eligible for an ABLE account, but the “age of onset” of your disabilities must have been before you were 26 years old.) If you meet this age criteria and already receive SSI or SSDI benefits, you are automatically eligible.
If you do not already receive SSI or SSDI benefits, you may still be eligible to open an ABLE account. To qualify in this case, you must meet the “age of onset” requirement as well as the Social Security Administration’s requirement that you have “significant functional limitations.” In addition, a licensed physician must provide a letter of certification that attests to your disabilities.
Q: How would ABLE Account savings affect my SSI or Medicaid benefits?
A: You can put as much as $100,000 in an ABLE account, and it will be exempted from your SSI $2,000 individual resource limit. If your ABLE account exceeds $100,000, any amount over $100,000 will count as a resource toward the $2,000 SSI limit. All amounts in an ABLE account are exempted from the Medicaid resource limit.
Q: Are there contribution limits?
A: If you are a qualified individual, you are allowed to have only one ABLE account. The total contribution to your account each year by all contributing individuals, including family and friends, is $14,000. That amount will be adjusted annually for inflation. Each state has different rules for the total contribution limit that can be made to an ABLE account over time.
Q: I have a disability that qualifies me for an ABLE account. What happens if there’s money left in my account when I die?
A: Your ABLE account will have a payback provision. This means that, when you die, Medicaid will be paid back for any services that were provided to you with funds remaining in the account. (If you still have outstanding bills for any Qualified Disability Expenses, the money in your STABLE Account can be used to pay those expenses before Medicaid is reimbursed.) Your account can also be used to pay for funeral and burial costs. Importantly, Medicaid can only seek repayment from your STABLE account for amounts it paid after you opened your STABLE Account (or, if you rolled over from another ABLE plan, after you opened that first ABLE account.)
Any remaining funds, after payback, will be distributed after your death to a beneficiary you have chosen.
Q: What expenses can I pay with the money in my ABLE account?
A: Expenses you can pay for with ABLE account money must be related to living your life with a disability. These include education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services.
Q: What should I consider before opening an ABLE account?
Before opening an ABLE account, remember that there are spending restrictions as well as a payback provision. Like most families and individuals, you may want to make an ABLE account part of a larger plan that includes a third-party special needs trust. You may also want to explore other ways to save. For more information or to open a “STABLE” account in Ohio, visit www.stableaccount.com
This “Law You Can Use” consumer legal information column was provided by the Ohio State Bar Association. It was prepared by attorney Logan K. Philipps of Resch, Root and Philipps, LLC.