In an effort to encourage disabled persons to be productive and not be impoverished to retain public benefits such as Supplemental Security Income and Medicaid, Congress passed the Achieving a Better Life Experience Act (ABLE Act) at the end of year 2014 and Texas last year followed the lead of Congress by permitting the establishment of ABLE accounts helping the disabled.
Social Security has now published guidelines for states (such as Texas) in the establishment of ABLE accounts which permit an eligible person to save for disability related expenses of the account’s designated beneficiary (defined as a person who is either: (1) eligible for Supplemental Security Income (SSI) based on blindness or disability that began before the person was 26; (2) someone who has certified or whose parent or guardian has certified, that the person is either blind or has a medically determinable impairment and the disability or blindness occurred before the person was 26; or (3) entitled to disability insurance benefits, childhood disability benefits or disabled widow or widower’s benefits). A person can be the designated beneficiary of only one ABLE account, but it can be in any state.
Texas is presently working on regulations on the conditions in opening an ABLE account. It is anticipated such regulations will be effective sometime this summer.
After the death of the designated beneficiary and after payment of disability expenses, the state’s Medicaid program is entitled to be reimbursed for the benefits the designated beneficiary received. Although any person can contribute to an ABLE account, the total contribution in any one calendar year is the annual gift tax account exclusion (presently $14,000). Distributions can only be made to the designated beneficiary for education, housing, transportation, employment training and support, assisted technology and related services, health, legal fees, funeral and burial and basic living expenses.
The balance of an ABLE account is excluded up to $100,000 without counting as a resource for SSI and Medicaid (normally a single person can only have $2,000).
If the ABLE account exceeds $100,000 which causes the resource limit for SSI ($2,000 for a single person) to be exceeded, then SSI is suspended although Medicaid coverage is continued. If the ABLE account isn’t the cause of being over the resource limit, then Medicaid will be lost in addition to SSI being suspended.