In 2014, Congress passed the Achieving Better Life Experience (“ABLE”) Act which authorizes the use of 529A accounts – or “ABLE accounts” – as an alternative/supplement to Special Needs Trusts. The ABLE Act allows individuals to establish ABLE accounts similar to the college savings accounts you may recognize as “529 Accounts”.
The ABLE accounts were authorized by Congress as a way to allow disabled individuals the ability to save money without jeopardizing their eligibility for government aid. Although the Oregon legislature authorized ABLE accounts last year, it has not yet promulgated the rules for setting up and administering the accounts. A focus group is currently meeting to develop those rules. At this time, it appears that the earliest date ABLE accounts will be available in Oregon is January 1, 2017.
Some quick facts about these accounts:
- Purpose? Allows disabled individuals a tax-favorable savings program without disqualifying them from Medical and SSI benefits.
- When Available in Oregon? The earliest date Oregonians will be able to open an ABLE account will be January 1, 2017. Each state will administer its own accounts. The Oregon legislature authorized the ABLE accounts in 2015 and has a focus group formed to draft the regulations.
- Who’s Eligible? Disabled individual whose disability manifested prior to the age of 26.
- Annual max contributions: Federal annual gift tax exclusion amount, currently $14,000. But, unlike the gift tax exclusion, the annual maximum ABLE account contribution is $14,000 per beneficiary, not per donor.
- How Many Allowed? Each beneficiary may only have one ABLE account.
- Max Account Balance: $100,000
- Tax Free Growth – growth in the account is tax free so long as the annual contributions don’t exceed $14,000, the maximum balance doesn’t exceed $100,000, and the funds are only used for “government-approved disability-related” expenses.
- Used for? Government-approved disability-related expenditures include: housing, transportation, employment training, education, health and wellness.
NOTE: Allowing the funds to be used for housing expenses is HUGE. Social Security POMS do not allow the use of Special Needs Trust funds to pay rent/mortgage/utilities expenses. It appears that the regulations on the ABLE accounts will be broader to allow for payment of those expenses without disqualifying the individual from assistance programs. We’ll know more for certain once Oregon releases its ABLE account regulations. Stay tuned!