What are the ABLE Accounts? Not many people are aware of it, but if you have a disabled relative, you can save money for their benefit, WITHOUT jeopardizing their receipt of Medicaid or SSI. In the past, a Supplemental Needs Trust was the only option.  Under the Achieving a Better Life Experience (ABLE) Act, family and friends may now contribute up to $14,000 a year to an ABLE account, without the cost of setting up a Trust.   

What can the money be used for? The money in the account can be used for the qualified disability expenses, which include beneficiary’s education, housing, transportation, employment support, financial management and wellness.  Similar to the money in the more familiar 529 Plan, all income in the account grows tax free and all withdrawals for the qualified  disability expenses are also tax free.

Impact on Government Assistance? Regardless of the amount of assets in the ABLE account, the beneficiary’s Medicaid eligibility will not be suspended. However, if the beneficiary is receiving Supplemental Security Income (SSI), no more than $100,000 is permitted to be kept in the ABLE account.  

Medicaid Payback Provision? In the event the beneficiary of the ABLE account dies (or ceases to be an individual with a disability) with remaining assets in the ABLE account, the remaining assets will be distributed to the New York Medicaid to repay the cost of the medical assistance provided to the beneficiary after the creation of the ABLE account.

When can you open an ABLE account? The legislation was passed by Congress at the end of 2014 and has been recently signed by President Obama. Now, individual states must pass the required legislation, to enable the individual accounts in each state.

Why a Supplemental Needs Trust may still be a better option.

  1. A Supplemental Needs Trust, set up by a relative for the benefit of a disabled beneficiary, does NOT need to have a Medicaid Payback Provision. As a result, any money left over after the death of a beneficiary will be able to be passed on to the remaining family members.

  2. A Supplemental Needs Trust can be set up at any point. The legislation to be able to do so in New York must  still be passed.

  3. A Supplemental Needs Trust does not have the multitude of restrictions that are contained in the ABLE legislation:

    1. A Supplemental Needs Trust may contain any amount of money, without a $100,000 limit for the purpose of SSI benefits.

    2. An ABLE account beneficiary must have been classified as ‘disabled’ by the time he turned 26.  There is no such restriction for the beneficiary of a Supplemental Needs Trust.

    3. A maximum contribution that an individual can make to an ABLE account is $14,000 per year. There is no maximum contribution limit for a Supplemental Needs Trust (although a gift tax return may need to be filed for higher amounts).