Financial Planning

A.B.L.E Act

Many are calling the passage of the law the most significant piece of legislation to affect the special needs community since the Americans with Disabilities Act was passed almost twenty-five years ago.  The Achieving a Better Life Experience (ABLE) Act was approved by Congress in its final days of the 2014 session and voted into law by the President on December 19, 2014 as part of the tax extenders package. 

Under the laws that were in effect prior to December 2014, people who receive Social Security income, Medicaid benefits, and other federal means-tested benefits based on a disability are only eligible for their benefits if they have less than $2,000.  Until the law becomes regulated by the states, the old laws will stay in place.  The test for Social Security eligibility is, for example, at its most basic level, a two-part test.  If a person qualifies as (1) being disabled, that person may still be ineligible for benefits if (2) he or she earns an income that yields more than $2,000 per month.  If the person is a minor, his or her parents’ income is considered. 

There were many problems with the old laws.  Adults with disabilities have been forced into poverty, being disallowed from saving for large purchases or their futures.  Parents have had no choice but to disinherit their children so as to prevent their benefits from being cut off when the parents die.  Businesses have been hiring people with disabilities for many years, knowing that they can pay them significantly less than what they pay their similarly-situated peers, because of the Social Security ceiling. 

Why not just forfeit Social Security and other federally-funded benefits?  While some people never apply for benefits, others find that the problem with that strategy is that many services and organizations that fund programs for people with special needs are available only to those on Social Security.  Therefore, people with disabilities cannot pay cash for a lot of the wonderful services and programs available to them. 

The ABLE Act is, quite simply, a fantastic solution.  It will allow people with disabilities and their families to establish tax-free savings accounts under Section 529 of the Tax Code and to save up to $100,000 without having their benefits cut off.  The accounts will be similar to Section 529 college savings accounts with the difference being that the expenditures from the ABLE accounts will be made for special needs purposes as opposed to solely educational purposes.  Expenses that qualify will include those incurred for the education, housing, health, assistive technology and devices, transportation, employment training and support of the person with the disability.  The funds in the account will simply supplement the governmentally-funded support without replacing it. 

Anyone that was disabled before the age of twenty-six and either receives Social Security income or files the necessary paperwork with the IRS will be eligible to establish the accounts.  They (or their family or friends) will be able to contribute up to $14,000 per year, in aggregate. 

ABLE accounts will have Medicaid pay-back clauses, which will mandate that a percentage of the balance of the accounts at the death of the beneficiary be paid back to the federal government for Medicaid expenses incurred on behalf of the person.  

Families with younger children will be able to use ABLE accounts in their estate plans, either as an independent tool or as part of a most complication plan, and adults with disabilities will soon be able to set up ABLE accounts and to accumulate some savings.  It is possible that there will be accounts available in 2015, although each state will need to establish regulations for the accounts. 

*Written by Ashley Barlow, mom to Griffin (7) and Jack (4), who happens to have Ds, and wife to Brandon.  She is a privately practicing attorney in Ft. Thomas, Kentucky, serves on the Governmental Affairs Committee of the DSGAC and is a DS-Ambassador with the NDSS.


ABLE Act Presentation By Ashley Barlow

Social Security Disability Help Blog
Click here to read an article from blogger, Molly Clarke.

Financial Strategies For Your Family

Click here to read an article by Chris Collier, SLu, ChSNC, Financial Strategist and Special Care Planner

Guardian and Estate Planning

Click here to read a book by the Ohio Developmental Disability Council about Guardianship in Ohio.