WHAT IS AN ABLE ACCOUNT? An ABLE account is a tax-advantaged savings account for individuals with disabilities. Federal needs-based programs, such as Supplemental Security Income (SSI), Medicaid, and Section 8 Housing Assistance, have limits on resources and income. A person receiving such assistance is allowed only up to $2,000 in savings and risks losing benefits if he saves more. An ABLE Account allows a disabled individual to save money for future needs without risking the loss of government benefits.
WHO IS ELIGIBLE FOR AN ABLE ACCOUNT? ABLE accounts are available to individuals who are blind or have a disability, as defined by the Social Security Act, and whose blindness or disability started before age 26. Recipients of SSI or Social Security Disability Insurance (SSDI) are automatically eligible. Others must have a letter from a physician certifying that he or she is disabled and that the disability started before age 26.
HOW DOES AN ABLE ACCOUNT WORK? Individuals who meet the eligibility requirements can set up an ABLE account through the Oregon ABLE Savings Plan (http://oregonablesavings.com/), or an ABLE program in any other state. (Currently 15 states in addition to Oregon have open ABLE programs. Residency is not required and not all programs are the same, so shopping around in another state may be beneficial.) The ABLE account must be opened by the disabled individual or one who has authority to do so on behalf of the disabled individual such as a conservator, or agent under a power of attorney. While the ABLE account holder may only have one ABLE account, the holder, her family, or her friends, can deposit up to $14,000 into it, once set up. The total maximum deposit from all sources per year is $14,000 -- no limits on who can contribute, only on the amount. The maximum amount that may be held in the Oregon ABLE account is $310,000. However, once the account reaches $100,000, any SSI benefits will be suspended until the account drops below $100,000.
Investment earnings in the ABLE account are tax-deferred. Distributions for the benefit of the account holder, for a "qualified disability expense" (QDE) of the account holder, are tax-free. QDE's include: education, housing, transportation, employment training, assistive technology and related services, health, prevention and wellness, financial management, legal fees, funeral and burial costs, expenses for oversight and monitoring. Non-QDE distributions are allowed, but are included in the individual's gross income, which may affect eligibility for programs or income taxes. After the account holder's death, the balance is subject to Medicaid estate recovery.
WHY CHOOSE AN ABLE ACCOUNT? Estate planning attorneys have been utilizing special needs trusts for years to protect government benefits for disabled individuals who inherit, or will inherit, money from family members or friends. The Oregon ABLE Savings Program provides an alternative solution that may be a better option in some circumstances. An ABLE account allows for individual autonomy in allowing disabled individuals who have capacity to save and manage their own account in excess of the $2,000 resource limit of many government assistance programs, no need to rely on a trustee. The tax-deferred status of income in the ABLE account contrasts with higher tax brackets for special needs trusts. An ABLE account costs less to set up because there is no need for an attorney to draft documents, as there is with a special needs trust.
ABLE accounts will not work or be appropriate in all situations, but they provide an additional tool for attorneys advising individuals with disabilities and their families.
For more information about ABLE accounts, see the ABLE National Resource Center at http://www.ablenrc.org/. For more information or to set up an Oregon ABLE account, see the Oregon ABLE Savings Plan at http://oregonablesavings.com/.