At the beginning of 2016, the Stephen Beck, Jr. ABLE Act of 2014 (known as the “ABLE Act”) became law. The remarkable aspect of this law is that some, but not all, of the rules regarding resource limits under SSI ($2,000) and Medicaid are now modified as a result of this federal legislation. And, the use of the ABLE account for housing or other expenses is far more expansive than non-ABLE accounts, including special needs trusts.
Similar in structure to education tuition accounts known as 529 Plans, the ABLE Act statute adds Section 529A to the Internal Revenue Code allowing the creation of qualified ABLE accounts by a State agency and also amends parts of the Social Security Act.
Many of the families who seek my legal advice are concerned about the actual implementation of the law in New York State. First, the State must pass enabling legislation (which essentially mirrors the requirements of the federal legislation). Second, the program must be maintained by the State or a State agency. And third, the program must become operational.
The Internal Revenue regulations as originally proposed would have limited the option to establish an ABLE account to the State of residence of the disabled person who is the owner/designated beneficiary of the account.
However, in November 2015, the IRS modified this limitation. As a result, the disabled individual (or their family or guardian) may select any State with an operational ABLE program and enroll in that State’s program.
If the designated beneficiary of the ABLE account moves to another state or otherwise changes their residence, the ABLE program in the former state may continue to maintain the account of the designated beneficiary.
The nonprofit ABLE National Resource Center (www.ABLENRC.org) maintains a list tracking implementation of the legislation by State.
The ABLE account can be part of your estate and special needs planning combined with a special needs trust. Watch this blog for additional updates on the ABLE Act and how it can be used to benefit your disabled family member.