Understanding Florida ABLE Accounts (Achieving a Better Life Experience)

Understanding Florida ABLE Accounts (Achieving a Better Life Experience) Beginning on July 1st, Florida special needs persons can now open ABLE accounts. These accounts were authorized in December of 2014, when President Obama signed The Stephen Beck, Jr. Achieving a Better Life Experience (ABLE) Act, a federal law allowing each state to establish a program that offers tax-free savings and investment options to encourage individuals with a disability and their families to save private funds to support health, independence, and quality of life. Money contributed to an account in one of these programs is generally disregarded when determining eligibility for federal benefit programs, such as Supplemental Security Income (SSI) and Medicaid.

This means that clients that were in the past only allowed to keep $2000 or less in a bank account, or lose important benefits, like SSI and Medicaid, can now have an account that can be used for certain “qualified disability expenses”. Below are a few of the rules that apply to ABLE accounts:

1. Disability must have occurred before the age of 26
2. Account can be funded by anyone including the person with the disability
3. Controlled by person with disability and their guardian, or agent
4. Funding per year limited to the annual IRS exemption (currently $14,000)
5. Tax free
6. Capped at $100,000 for SSI recipients
7. Funds pulled from an ABLE account will generally NOT reduced benefits

These accounts can give a person with disabilities a sense of independence and allow them to pay for goods and services they need without losing benefits. For example, someone receiving SSI benefits who also received income from another source would have their SSI benefit reduced by the amount received. For example, if John get $733 dollars a month in SSI, and his mother gives him $200 a month to help him pay for out of pocket expenses, he could lose $200 of his SSI money each month. However, if John has an ABLE account, which his mother funded each month with $200, (up to the limit of $14,000 per year) John could use the $200 per month and there would be no effect on his monthly SSI benefit.

The ability to have funds available for spending on important items such as clothing, entertainment, travel, and personal items, gives a person with disabilities the opportunity to more fully participate in everyday life, have control over their money, and avoid unnecessary legal fees and compliance issues that can come with establishing a special needs trust.

Special needs trusts are still a great way for family members to leave money under a will or trust, and for larger gifts during lifetime, a parent, grandparent or guardian can set up a special needs trust, name a trustee and enhance the life of a disabled family member. However, the trustee must be careful to follow the distribution rules and there are often reporting issues when dealing with the Social Security Administration that can lead to frustration for everyone.

Please keep in mind that this post is just a general overview of what an ABLE account can do and how it might help a person with disabilities lead a more fulfilling and happier life. Accounts can work alone or in conjunction with an already established special needs trust.

If you would like more information, please give us a call and set up a time to discuss how and if an ABLE account could help you or someone you love.