Question: What is the benefit of creating an “ABLE” account?
Many states have adopted the ABLE program under the Achieving a Better Life Experience (“ABLE”) Act. The ABLE program allows for a different type of planning to provide for the supplemental needs of individuals who are disabled. The ABLE Account Act for many states is based on the federal ABLE account program and the similar Internal Revenue Code section 529 college savings accounts.
Benefits of an ABLE Account:
The primary advantage to having an ABLE account is that the account funds preserve the individual beneficiary’s eligibility for public benefits, such as Medicaid and SSI, with some notable SSI exceptions: (1) income from the beneficiary’s job is a countable resource for SSI purposes even if directly deposited into the ABLE account; (2) any amount in the ABLE account exceeding $100,000 is countable for SSI purposes (even though the account may hold a little over $500,000 in total); (3) funds which are withdrawn and not used in the same month of withdrawal are countable resources for SSI purposes.
ABLE account funds are also protected from creditors of the beneficiary. After the beneficiary’s death, the account will be paid to the beneficiary’s estate, which is both subject to income tax and reachable by creditors.
The investment growth occurs tax-free inside the ABLE account. Moreover, there are a number of investment options to choose from inside the ABLE plan.
Comment: While ABLE accounts are generally a more simple alternative to special needs trust, there are certain limitations. It is, therefore, important to recognize the client’s goals which might be better suited with a special needs trust.
As always, if you have any questions or would like to learn more, please contact me at email@example.com or 301-575-0313.
ABOUT STEVE SHANE
Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.
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