News Release: The ABLE Act

January 5, 2015

News Release: The ABLE Act

Congress recently passed the Achieving a Better Life Experience (“ABLE”) Act which establishes a new type of tax advantaged saving plan for certain people with disabilities.  From a tax perspective, these accounts are similar to Roth IRAs and 529 education savings plans in that, while contributions are not tax deductible, money grows tax-free and no tax is incurred when funds are withdrawn.

What Problem is the ABLE Act Trying to Resolve?

Many of those living with disabilities (and their families) depend on a variety of public benefits for income, health care, food and housing assistance.  Many of these benefits are means based which, in many cases, essentially requires that in order to remain eligible for these benefits, an individual must remain poor.  Paradoxically, living with a disability can be (and often is) expensive.  Thus, maintaining a humble financial situation is both detrimental to the disabled individual yet required in order to receive benefits.  The ABLE Act addresses this problem by allowing certain disabled individuals to have investment-type accounts, the balances of which aren’t counted for public-benefit-eligibility purposes.

Who can be the Beneficiary of an ABLE Account?

Anybody that is or was disabled prior to the age of 26.  Though Congress delegated some of the finer points of what constitutes a disability to the Treasury Department (which the Department has been directed to expand upon through publishing Treasury Department Regulations in 2015), what Congress did make clear is that anyone disabled prior to 26 receiving either SSI or SSDI, is eligible.  Those not receiving SSI or SSDI, but who meet the yet-to-be established criteria will also be allowed to establish an account.

How is an ABLE Account Established?

Through a state exchange which each state will have to set up.  This is similar to 529 Plans.  Once an account is established, the annual contribution limit is set at $14,000 per account, indexed for inflation.  Anybody – family, friends, etc. – can make contributions to an account.  But again, the contributions are not tax-deductible.

What Expenses Can ABLE Account Funds Pay For?

The kind you’d expect: Those incurred by or on behalf of the disabled beneficiary as a consequence of his or her disability.  More specific guidance on this point is to be provided by the Treasury Department in 2015.

What Else Do I Need to Know?

The total amount that can be contributed into a single ABLE account varies by state.  In Colorado, the aggregate account balance cannot exceed $350,000.  However, once the account balance exceeds $100,000, the beneficiary is suspended from SSI benefits and no longer receives monthly income, though he or she would continue to be eligible for Medicaid.  Lastly, the Act does leave open the possibility of the state recouping Medicaid payments where there is a balance remaining in the accounts upon the death of the beneficiary, though the finer points of this aspect of these accounts have yet to be defined.

For more information please feel free to call The Germany Law Firm P.C. at 303-454-3711 or visit our website at

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