ABLE - "Achieve a Better Life Experience"- Federal
Legislation
What You Need to Know About the Proposed Law
By: Bridget
O'Brien Swartz
At the urging of a number of national disability advocacy
groups, federal legislation to "Achieve a Better Life Experience",
more commonly known as "ABLE," has been proposed
once again in both houses of Congress (HR 3423 and SB 1872) in
November 2011. The Senate version has been referred to the Senate
Committee on Finance and the House version to the House
Subcommittee on Health.
The legislative purpose for this initiative is two-fold:
(1) To encourage and assist individuals and families in saving
private funds for the purpose of supporting individuals with
disabilities to maintain health, independence, and quality of life;
and
(2) To provide secure funding for disability-related expenses on
behalf of designated beneficiaries with disabilities that will
supplement, but not supplant, benefits provided through private
insurances, the Medicaid program, the Supplemental Security Income
(SSI) program, the beneficiary's employment, and other
sources.
The proposed legislation creates a new subsection (f) ABLE
Account within Section 529 of the Internal Revenue Code and has
been redrafted to follow the requirements and regulations of a
traditional 529 qualified tuition program.
- Same annual contributions apply (after $13,000 gift tax rules
apply);
- Same tax-free treatment of account applies (income earned grows
tax-free, withdrawals for qualified disability expenses are
tax-free);
- Same reporting requirements apply as to a traditional 529;
- A beneficiary may have either an ABLE account or a traditional
529 qualified tuition program (multiple ABLE accounts or multiple
529 plans still allowed);
- Rollovers allowed from an ABLE account to traditional 529 if
beneficiary is no longer deemed disabled (all other 529 rollovers
apply to ABLE accounts);
- Rollovers allowed to other family member's ABLE account or
their traditional 529.
In the bill, an "individual with a disability" is defined as one
who is "receiving, deemed to be or treated as receiving"
Supplemental Security Income benefits or benefits under Title II of
the Social Security Act, such as Social Security Disability
Insurance or Disabled Adult Child benefits. Alternatively, any
individual who has a medically determined physical or mental
impairment, which results in marked and severe functional
limitation and which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of
not less than 12 months or is blind, and provides
a copy of their diagnosis signed by a physician qualifies for such
an account.
The account can be utilized for "qualified disability expenses,"
which are defined as follows: Education; housing; transportation;
employment support; health prevention and wellness; assistive
technology and personal support; miscellaneous expenses such as
administrative expenses; and "other" approved expenses which might
be defined at a later date.
When the assets in an ABLE account reach $100,000, if the
beneficiary is receiving SSI benefits, such benefits will be placed
in suspension until such time as the assets in the ABLE account
drop back below $100,000. Under no circumstances, however,
will anyone with an ABLE account who is receiving Medicaid benefits
lose those benefits.
In the event a beneficiary dies (or ceases to be an individual
with a disability) with assets remaining in an ABLE account, the
assets in such account are first distributed to any State Medicaid
plan that provided medical assistance to the designated beneficiary
to reimburse it the cost of services it has provided since the time
the ABLE account was created.
Among the many issues with ABLE are the following:
- ABLE is much more limited in how money can be spent than a
special needs trust (for example, no vacations under ABLE);
- Reporting requirements to the federal government when there are
no comparable requirements with respect to a 3rd party
special needs trust, and if the designated beneficiary is an adult
who is not under guardianship/conservatorship, the ABLE reporting
requirements are much more than a 1st party special
needs trust;
- Pay back or reimbursement to the state when the beneficiary is
no longer disabled or dies unlike a 3rd party special
needs trust where the remainder stays within the family;
- If there is a guardianship/conservatorship, then court approval
is required to establish the ABLE Account with the beneficiary's
own assets, and ongoing court monitoring is likely;
- If ABLE Accounts for a single beneficiary in total exceed
$100,000, the beneficiary will lose SSI and in some states where
Medicaid is not tied to SSI, the beneficiary may also lose
Medicaid.
Although the ABLE Account provides an additional financial
planning tool for those with special needs and their families, it
is not a substitute for comprehensive special needs
planning.
About the author: Bridget
O'Brien Swartz is a partner at the Phoenix law firm of Jaburg Wilk. She is a
Certified Specialist in Estate & Trust Law certified by the
State Bar of Arizona and Certified as an Elder
Law Attorney by the National Elder Law Foundation (NELF).
Bridget is past president of the Arizona Chapter of the National
Academy of Elder Law Attorneys (NAELA) and of the Special Needs
Alliance. She is a 2011 Southwest Super Lawyer as well as a
2012 Best Lawyers in Elder Law/Trust and Estates. She is
a frequent author on special
needs and elder law topics. Bridget can be reached
at bos@jaburgwilk.com
or 602.248.1013.
This article is not intended to provide legal advice.
Always consult an attorney for legal advice for your particular
situation.
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