Regulations have now been approved in four states (Ohio, Florida, Tennessee and Nebraska) for the Achieving a Better Life Experience (ABLE) Act which permits disabled individuals (if they were disabled before age 26) or their families to set up a special savings account (similar to a 529 college savings account) with up to $14,000 per year (provided the balance remains below $100,000) which can grow tax-free as long as the funds are used for qualifying disability related expenses such as transportation, employment training, health, housing and education, funeral and burial expenses, etc. which are to supplement, not supplant (similar to a special needs trust) government benefits. These accounts will not count toward the Medicaid resource limit (which is $2,000 for a single person) in Texas. This encourages disabled persons to be more productive and save. However, like special needs trusts established with the funds of the person who is disabled, there is a payback provision to Medicaid for services rendered during the lifetime of the beneficiary. Although each individual’s situation is different, if the disabled person has limited assets, it may be better to consider an ABLE account rather than a special needs trust (which is more expensive to establish). Since many disabled persons under age 65 establish a special needs trust since the resources in the trust are not counted for Medicaid purposes and the transfer of assets into such a trust are not penalized. If a special needs trust established by someone other than the disabled person with funds not belonging to the disabled person, then there is no payback provision to the government.
An ABLE account can be set up by a non-resident of that state. Thus, although Texas has not finalized any regulations (although the law was passed in the last legislative session), Texans can presently establish ABLE accounts in another state without jeopardizing their public benefits.
Prior to opening an out-of-state ABLE account, one should consider the minimum initial contribution and the minimum additional contributions, annual fees, if the account can be rolled over, if a debit card is available with the program and at what cost, and the variety of investment options and the fees associated with the investment choices.