January 6, 2015
Thanks to a new law passed in Congress last month, disabled individuals will no longer have to choose between saving a small nest-egg for future care expenses or preserving long-term eligibility for low-income benefits such as Medicaid or Supplemental Social Security Insurance (SSI).
Under the Achieving a Better Life Experience (ABLE) Act, individuals with disabilities now have the opportunity to begin saving their own money toward future health-care costs, housing expenses, transportation, education, and other needs without jeopardizing eligibility for critical government benefits.
Eligibility under the ABLE Act is limited to those who became severely disabled before turning age 26, with a $14,000 cap on yearly contributions from all sources. A total of $100,000 tax-free can now be accumulated in a special ABLE account, which is limited to one per person.
Prior to the passing of the ABLE Act, individuals with disabilities were unable to have assets totaling more than $2,000 or earn more than $680 per month without forfeiting eligibility for government programs like Medicaid. This was worrisome for families, considering that Medicaid is often the only healthcare option available for those with significant disabilities.
To protect such benefits, then, parents of disabled children would often go to great lengths to avoid putting assets, donations or inheritances their child’s name. But now, under this law, families have new opportunities to help their child save for the future while keeping much-needed government benefits intact.
Additionally, the ABLE Act offers another exciting benefit in that disabled individuals will no longer be deterred from pursing gainful employment opportunities in the local community.
Prior to the passing of this law, individuals who had some capacity to work and contribute to society were often deterred from doing so out of fear that they would cross the income thresholds of their benefits and lose everything. Now, young people with disabilities can take a chance in pursuing meaningful work opportunities without sabotaging their financial future.
As a Sacramento special needs attorney, I feel this law is a positive step forward in empowering disabled children and young adults. An ABLE Account combined with solid planning tools such as Special Needs Trusts affords families with even more protection and flexibility when saving for the future. A good special needs attorney can help families utilize these tools for maximum savings opportunities and peace of mind.