If you’re on Social Security Income (SSI) or Medicaid (not SSDI), you’ve probably heard the rule: you can’t have more than $2,000 in savings or other resources. That’s barely enough for new tires, let alone a vacation or a new furnace.
- Enter the ABLE Act (Achieving a Better Life Experience), passed in 2015. Iowa has its own version—hence the “I.” Originally, it was intended for individuals whose disability began before the age of 26. The maximum contribution limit is $19,000 a year* total. Contributions can come from any source: the beneficiary and other gifts. However, if the balance of the account exceeds $100,000, the extra amount counts as a resource.
Here’s the good news: the rules just got better!
- Age Limit Raised: Now, if your disability started before age 46, you qualify.
- *Work Credit Made Permanent: If you’re working, you can contribute up to $15,060, additionally, per year. This money must come from earnings only.
- Tax Perks: Tax credits have increased for contributions.
- 529 Plan Rollovers: Got a college savings plan you didn’t use? Roll it into your ABLE account (subject to annual limit).
You can use ABLE money for almost anything you want—housing, new car, appliances, travel, clothing, snack food, even that new virtual reality headset you’ve been asking Santa for.
Who can open and manage the account? There is a priority list: person with the disability (if the person has decision-making capacity), agent under general durable power of attorney, conservator, spouse, parent, sibling, grandparent, SS rep. payee. In some cases, this can be an issue. Common question: can grandma manage the account, instead of mother or sibling? No. If you find yourself in that situation (where the person with priority struggles with money management or decision-making issues) you may need to become a court appointed conservator in order to pull rank.
ABLE is not a replacement for inheritance planning. Because of account limits, an ABLE account is not a replacement for planning for inheritance for a loved one with a disability. The appropriate tool for that is a supplemental needs trust. Do not disinherit your child or grandchild who has a disability. Contrary to popular belief, Medicaid does not pay for everything! There are much better options that will allow your loved one to escape living in poverty while still protecting his or her eligibility for government programs and avoiding payback to the state.
Enroll at https://www.iable.gov/benefits
