ABLE Accounts: 10 Things You Should Know

Transcription

1 ABLE Natinal Resurce Center 1667 K Street, NW Suite 640 Washingtn, DC (202) inf@ablenrc.rg ABLE Accunts: 10 Things Yu Shuld Knw 1. What is an ABLE accunt? ABLE Accunts, which are tax-advantaged savings accunts fr individuals with disabilities and their families, will be created as a result f the passage f the Stephen Beck Jr., Achieving a Better Life Experience Act f 2014 r better knwn as the ABLE Act. The beneficiary f the accunt is the accunt wner, and incme earned by the accunts will nt be taxed. Cntributins t the accunt made by any persn (the accunt beneficiary, family and friends) will be made using pst-taxed dllars and will nt be tax deductible, althugh sme states may allw fr state incme tax deductins fr cntributin made t an ABLE accunt. 2. Why the need fr ABLE accunts? Millins f individuals with disabilities and their families depend n a wide variety f public benefits fr incme, health care and fd and husing assistance. Eligibility fr these public benefits (SSI, SNAP, Medicaid) require meeting a means r resurce test that limits eligibility t individuals t reprt mre than $2,000 in cash savings, retirement funds and ther items f significant value. T remain eligible fr these public benefits, an individual must remain pr. Fr the first time in public plicy, the ABLE Act recgnizes the extra and significant csts f living with a disability. These include csts, related t raising a child with significant disabilities r a wrking age adult with disabilities, fr accessible husing and transprtatin, persnal assistance services, assistive technlgy and health care nt cvered by insurance, Medicaid r Medicare. Fr the first time, eligible individuals and their families will be allwed t establish ABLE savings accunts that will nt affect their eligibility fr SSI, Medicaid and ther public benefits. The legislatin explains further that an ABLE accunt will, with private savings, "secure funding fr disability-related expenses n behalf f designated beneficiaries with disabilities that will supplement, but nt supplant, benefits prvided thrugh private insurance, Medicaid, SSI, the beneficiary's emplyment and ther surces." 3. Am I eligible fr an ABLE accunt? The ABLE Act limits eligibility t individuals with significant disabilities with an age f nset f disability befre turning 26 years f age. If yu meet this age criteria and are als receiving benefits already under SSI and/r SSDI, yu are autmatically eligible t establish an ABLE accunt. If yu are nt a recipient f SSI and/r SSDI, but still meet the age f nset disability requirement, yu culd still be eligible t pen an ABLE accunt if yu meet Scial Security s definitin and criteria regarding significant functinal limitatins and receive a letter f

2 certificatin frm a licensed physician. Yu need nt be under the age f 26 t be eligible fr an ABLE accunt. Yu culd be ver the age f 26, but must have had an age f nset befre the individual s 26 birthday. 4. Are there limits t hw much mney can be put in an ABLE accunt? The ttal annual cntributins by all participating individuals, including family and friends, fr a single tax year is $14,000. The amunt may be adjusted peridically t accunt fr inflatin. Under current tax law, $14,000 is the maximum amunt that individuals can make as a gift t smene else and nt reprt the gift t the IRS (gift tax exclusin). The ttal limit ver time that culd be made t an ABLE accunt will be subject t the individual state and their limit fr educatin-related 529 savings accunts. Many states have set this limit at mre than $300,000 per plan. Hwever, fr individuals with disabilities wh are recipients f SSI, the ABLE Act sets sme further limitatins. The first $100,000 in ABLE accunts wuld be exempted frm the SSI $2,000 individual resurce limit. If and when an ABLE accunt exceeds $100,000, the beneficiary s SSI cash benefit wuld be suspended until such time as the accunt falls back belw $100,000. It is imprtant t nte that while the beneficiary s eligibility fr the SSI cash benefit is suspended, this has n effect n their ability t receive r be eligible t receive medical assistance thrugh Medicaid. Additinally, upn the death f the beneficiary the state in which the beneficiary lived may file a claim t all r a prtin f the funds in the accunt equal t the amunt in which the state spent n the beneficiary thrugh their state Medicaid prgram. This is cmmnly knwn as the Medicaid Pay-Back prvisin and the claim culd recup Medicaid related expenses frm the time the accunt was pen. 5. Which expenses are allwed by ABLE accunts? A "qualified disability expense" means any expense related t the designated beneficiary as a result f living a life with disabilities. These may include educatin, husing, transprtatin, emplyment training and supprt, assistive technlgy, persnal supprt services, health care expenses, financial management and administrative services and ther expenses which help imprve health, independence, and/r quality f life. 6. Can I have mre than ne ABLE accunt? N. The ABLE Act limits the pprtunity t ne ABLE accunt per eligible individual. 7. D I have t wait fr my state t establish a prgram befre pening an accunt? N. While the riginal law passed in 2014 did stipulate that an individual had t pen an accunt in their state f residency, this prvisin was eliminated by Cngress in This means that regardless f where yu might live and whether r nt yur state has decided t establish an ABLE prgram, yu are free t enrll in any state s prgram prvided that the prgram is accepting ut f state residents.

3 T determine which state ABLE prgrams are accepting ut f state prgrams, please refer t the individual state pages. 8. Will states ffer ptins t invest the savings cntributed t an ABLE accunt? Like state 529 cllege savings plans, states are likely t ffer qualified individuals and families multiple ptins t establish ABLE accunts with varied investment strategies. Each individual and family will need t prject pssible future needs and csts ver time, and t assess their risk tlerance fr pssible future investment strategies t grw their savings. Accunt cntributrs r designated beneficiaries are limited, by the ABLE Act, t change the way their mney is invested in the accunt up t tw times per year. 9. Hw is an ABLE accunt different than a special needs r pled trust? An ABLE Accunt will prvide mre chice and cntrl fr the beneficiary and family. Cst f establishing an accunt will likely be cnsiderably less than either a Special Needs Trust (SNT) r Pled Incme Trust. With an ABLE accunt, accunt wners will have the ability t cntrl their funds and, if circumstances change, still have ther ptins available t them. Determining which ptin is the mst apprpriate will depend upn individual circumstances. Fr many families, the ABLE accunt will be a significant and viable ptin in additin t, rather than instead f, a Trust prgram. Fr mre infrmatin, the webinar n ABLE Accunts, Trusts, Financial and Benefits Planning is archived n ur webiste alng with its slides and transcript. 10. Hw Will I knw Which State ABLE Prgram is Right fr Me?By the Summer f 2016, we expect that several states will have pened ABLE prgrams and be inviting eligible individuals natinwide t pen an ABLE accunt regardless f their state f residence. When cmparing State ABLE prgrams yu may want t cnsider the fllwing questins in rder t find a prgram that best meets yur needs: Opening an Accunt What prf will the ABLE prgram require fr yu t dcument in rder t pen an accunt r shw that yur disbursements are qualified expenses? Is there a minimum cntributin t pen an ABLE accunt? Is there a fee t pen an accunt and, if s, hw much is that fee? Maintaining the Accunt and Fees Is there a required minimum cntributin t yur accunt? If s, what is the amunt? Are the fees frnt end laded r are they reduced if yu leave yur funds invested fr several years?

4 Are there restrictins n hw ften yu can withdraw funds frm yur accunt? Investment Opprtunities What are the investment ptins the state ABLE prgram ffers? Are the ptins likely t meet yur needs fr limiting risk with the grwth f yur cntributed dllars t the ABLE accunt? Des the prgram ffer any unique r value added prgram elements t help yu save, cntribute t yur accunt, grw the accunt, and manage yur invested dllars? Des the state prgram ffer any unique r value added prgram elements (such as a match r rewards prgram, financial literacy inf r prgram fr beneficiaries) t help yu save, cntribute t yur accunt, grw the accunt, and manage yur invested dllars? If s, what is it? Unique t Yur State Des yur state have a prgram and, if s, d they ffer a state incme tax fr cntributins t their accunt? Is there a debit card/purchasing card available with the prgram? Are there added csts t this? Suth Carlina Status: Open fr Enrllment Prgram Name: SC ABLE Prgram Manager: STABLE Accunt and Intuitin ABLE Slutins, LLC Prgram Investment Institutin: Vanguard Grup, Inc. and Fifth Third Bank Prgram Website: SC ABLE Ttal Annual Cntributin Limit: $14,000 Accunt Limit: $426,000 Additinal Infrmatin: HB 3768 carried ver frm 2015 sessin and passed the Huse n 4/30/16 and the Senate 4/21/16. It was signed int law by the Gvernr n 4/29/16. SB 1050 was referred t the Senate Finance Cmmittee n 2/2/16. ABLE Legislatin: HB 3768; SB 1050 Prgram at a Glance What is the ttal annual cntributin limit? $14,000 Des this prgram ffer enrllment t ut f state residents? N. Is there a state incme tax deductin r credit fr cntributins made int accunts pened in this state by state residents? If s, hw much? Yes. 100% f cntributins t a qualified ABLE accunt may be deducted frm SC state incme tax.

5 Wh is the prgram administratr? The prgram is administered thrugh a partnership with Ohi's STABLE Accunts, which are backed by Intuitin ABLE Slutins, LLC Is there an initial minimum cntributin requirement t pen an ABLE accunt? If s, hw much? Yes. $50 Is there an annual set fee t maintain the accunt? If s, hw much? Yes. $42 per year payable at $3.50 per mnth Is there a required minimum cntributin t yur accunt? If s, what is the amunt? Yes. $1.00 Are there fees r restrictins t the number f disbursement yu are allwed? If s, what are they? N. Can I rll ver my ABLE accunt t anther ABLE prgram? If s, what is the fee t d s? Yes. There are currently n fees assciated with rlling ver yur SC ABLE accunt t anther ABLE prgram. Is there a debit card/purchasing card available with the prgram? If s, what is the added cst? Yes. There are n added csts fr a debit card. Wh is the investment manager? Vanguard Grup, Inc. and Fifth Third Bank Hw many investment ptins are assciated with the prgram? There are five investment ptins available. D thse investment ptins vary in risk? Yes. These investment ptins range frm lw risk (BankSafe Investment Optin - FDIC insured) t cnservative t aggressive with varying levels f risk, based n the risks f their underlying cmpnent investments. Is there a fee assciated with the investment chices? If s, hw much? Yes. Depending n the investment chices, the ttal fees range frm 0.19% t.34%. Are there ther characteristics unique t yur prgram? SC ABLE ffers a debit card that cmes with an nline prtal that tracks all transactins and allws users t categrize and write ntes n qualified expenses fr the purpses f recrd keeping.