WHAT IS AN ABLE ACCOUNT?
ABLE Accounts (named for the "Achieving a Better Life Experience Act" of 2014) are a tax-advantage savings account for individuals who have a significant disability that began before the age of 26. ABLE accounts allow eligible individuals to build savings and spend those funds on a wide range of expenses while maintaining their eligibility for public benefits, such as Supplemental Security Income ("SSI") and Medicaid. Individuals over the age of 26 may still establish ABLE accounts, so long as the onset of their disability was prior to age 26.
HOW DO ABLE ACCOUNTS WORK?
The beneficiary of an ABLE account is the account owner and the income earned from the account is not taxable. Any person may contribute funds to the account, including the beneficiary, family, friends, or a trust. In Florida, the total annual contribution that an ABLE account can receive is $15,000 for the year 2019, with an additional amount that may be contributed from the eligible individual's employment income. For SSI purposes, up to $100,000 may be maintained in an ABLE account as an exempt resource, and up to $418,000 may be kept in the account as an exempt resource for Florida Medicaid purposes. Allowable distributions from the account are limited to qualified disability expenses ("QDE"), which include: education, housing, transportation, health care expenses, financial management, funeral and burial expenses, etc. Generally, a QDE can be considered an expense that improves the health and independence of the beneficiary.
WHAT IS THE DIFFERENCE BETWEEN AN ABLE ACCOUNT AND A SPECIAL NEEDS TRUST ("SNT")?
A tremendous benefit of ABLE accounts, compared to SNTs, is that disabled individuals may have direct access to the account funds, allowing them to have greater control over the funds available for their benefit. ABLE accounts are free to open, not taxable, and may be administered without paying a trustee or the other expenses associated with a trust. In addition, QDE distributions need not be limited to expenses for the sole benefit of the disabled individual. Funds in an ABLE account are also treated more favorably upon the death of the beneficiary, allowing some final expenses to be paid immediately and incur a reduced Medicaid lien against the remaining funds.
WHAT HAPPENS UPON THE DEATH OF AN ABLE ACCOUNT BENEFICIARY?
In Florida, when the ABLE account beneficiary dies, funds in the account are subject to a Medicaid lien for reimbursement of benefits paid on that individual’s behalf. However, this lien is subject to several important limitations: 1) The lien may only be for benefits paid after establishment of the ABLE account, 2) the lien is paid only after any outstanding qualified disability expenses are paid (including funeral and burial expenses), and 3) if the beneficiary dies before the age of 55 any Medicaid lien is removed and assets in the account are treated like any other asset of the beneficiary (after any QDEs are paid the funds may then be transferred to the estate of the designated beneficiary).
To learn more about ABLE accounts please schedule an initial consultation by calling our office at (954) 227-7320 or using our online contact form (we will follow up with you within one business day).