A New Way to Save for Those with Special Needs
October 12, 2017
Making sure a loved one with special needs is taken care of can be challenging at best. New York recently enacted its statewide Achieving a Better Life Experience (ABLE) Plan so that disabled persons or their caregivers can open special savings accounts to save for disability related expenses; this is very similar in concept to the 529 College Savings Programs. ABLE accounts are generally able to accrue and distribute income tax free and distributions are excluded when calculating income and resources for Medicaid, Supplemental Security Income (SSI) and other means-tested benefit programs. The ABLE Act is designed to supplement, not supplant, these preexisting benefits.
One of the most important advantages to an ABLE account is that distributions from an ABLE account may be used to pay for housing expenses without reducing SSI benefits. Additionally, ABLE accounts can be used for expenses connected to: education, transportation, employment training, assistive technology, health, financial management, legal fees, funeral and burial expenses, personal support services and basic living expenses. These expenses are called Qualified Disability Expenses (QDE).
Either the disabled individual, a parent or legal guardian of the disabled individual, or the agent under the disabled individual’s Power of Attorney can open an ABLE account in New York. Anyone can contribute to an individual’s ABLE account (contributions are not tax deductible) including the individual with his/her own money, but only $14,000 in total can be contributed annually. In New York, the maximum balance for an ABLE account is $100,000.
One drawback to an ABLE account is that upon the death of the disabled person and after payment of any outstanding QDE, Medicaid is reimbursed for any money paid out on behalf of the disabled person from the date the ABLE account was established.
While an ABLE account is the newest option for our special needs loved ones, individual needs and circumstances vary greatly. An ABLE account may work well in conjunction with an individual or pooled SNT. Please give us a call if you think an ABLE account may be an option for you or a loved one. We would be happy to answer any questions.