In December 19, 2014, the Tax Increase Prevention Act of 2014 (the Act) was signed into law. Within the Act there was another bill, the “Achieving a Better Life Experience Act (ABLE) of 2014.” ABLE establishes a new type of tax-advantaged account for persons with disabilities; which allows them to save money for future needs while remaining eligible for government benefit programs.
Beginning in 2015, the Act allows states to establish tax-exempt Achieving a Better Life Experience (ABLE) accounts to assist persons with disabilities in building an account to pay for qualified disability expenses. An ABLE account can be set up for an individual (1) who is entitled to benefits under the Social Security Disability Insurance (SSDI) program or the Supplemental Security Income (SSI) program due to blindness or disability occurring before the age of 26 or (2) for whom a disability certificate has been filed with IRS for the tax year.
Annual contributions are limited to the amount of the annual gift tax exclusion for that tax year ($14,000 for 2015). Distributions are tax-free to the extent they don’t exceed the beneficiary’s qualified disability expenses for the year. Distributions that exceed qualified disability expenses are included in taxable income and are generally subject to a 10% penalty tax. However, distributions can be rolled over tax-free within 60 days to another ABLE account for the benefit of the beneficiary or an eligible family member. Similarly, an ABLE account’s beneficiary can be changed, as long as the new beneficiary is an eligible family member.
Except for SSI, ABLE accounts are disregarded for federal means-tested programs. Additionally, some ABLE accounts are provided limited bankruptcy protection.
Miller, Miller & Canby has assisted clients with estate & tax planning for over 65 years. Helen Whelan, a Principal with Miller, Miller & Canby, is an estate and trusts and Elder Law attorney who works closely with clients to assist them in planning for their care. She can recommend valuable resources to help individuals who may begin caring for a person who is elderly, disabled, or with special needs. She is a member of The National Academy of Elder Law Attorneys (NAELA), which was founded in 1987 as a professional association of attorneys who are dedicated to improving the quality of legal services to seniors and people with special needs. Helen is a member of Elder Counsel, a network of professionals who center their attention on the needs of the elderly, disabled and those with special needs. She also holds the accreditation from the Department of Veterans Affairs (VA) to provide counsel and representation to veterans and their families. As both a CPA and a practicing attorney, Helen has developed a recognized expertise in elder law and taxation law.
View more information on Miller, Miller & Canby’s Elder Law Practice. Contact Helen Whelan at 301-762-5212 or send her an email to schedule a meeting or discuss the benefits of ABLE accounts.