We all want to save for a rainy day, building a buffer so that we have the funds to weather adversity in the future. The challenge for people with Intellectual and developmental disabilities is that saving too much puts eligibility for Supplemental Social Security Income and access to Medicaid-funded disability supports at risk.
The Achieving a Better Life Experience Act of 2014 (ABLE Act) helps address this issue by allowing tax-favored savings and investment accounts for individuals with disabilities. In October 2020, the Internal Revenue Service (IRS) released final regulations providing guidance for “qualified ABLE programs” established by states under the ABLE Act of 2014.
ABLE accounts are designed to help people with disabilities and their families save and pay for disability-related expenses including:
- Housing
- Education
- Transportation
- Health
- Prevention and wellness
- Employment training and support
- Assistive technology
- Personal support services
- Other disability-related expenses
3 Ways New Guidance Makes It Easier to Help Your Loved One Save
- One of the most significant changes in the ABLE program is that the final regulations broaden the categories of people who may establish an ABLE account for an eligible beneficiary. Now the ABLE account beneficiary (your loved one) may designate any person to establish an ABLE account.
- If your loved one is unable chose another to establish his or her ABLE account, an agent working under a power of attorney may do so. If there is no power of attorney, you as the legal guardian, spouse, parent, sibling, grandparent, conservator or representative payee may establish the account on your loved one’s behalf.
- Annual deposits to ABLE accounts are capped at the value of the gift tax exclusion for any given year, currently $15,000 annually. However, under the final rule, people with disabilities who are employed can deposit their earnings into an ABLE account, above and beyond the existing contribution cap for the year.
Final regulations are expected to be effective January 1, 2021 but provide for “good faith” transition relief for state ABLE programs.
Learn more about the benefits of ABLE accounts and the specifics that will help you decide if an ABLE account is right for your loved one.
Click here to review the IRS final rule.
Because of the many details associated with ABLE accounts, please consult with your financial advisor to determine the best course of action for your loved one.