Disabled individuals generally have a tough time achieving financial stability and maintaining their quality of life. This is why Social Security provides disability benefits for these individuals to help level the playing field. These benefits are aimed at helping disabled individuals that may be unable to work to pay for medical costs and living expenses. One type of Social Security disability benefits known as Supplemental Security Income (SSI) has specific income and asset limits to be eligible. This puts disabled individuals in a difficult situation since many may be fearful of saving too much money which can make them ineligible for SSI. However, this keeps these individuals from improving their circumstances and quality of life. Fortunately, the Achieving a Better Life Experience (ABLE) Act helps to solve this problem, empowering disabled persons to have more control over their financial situation.
What is the ABLE Act?
Passed into law in 2014, the ABLE Act enables those receiving SSI benefits to open tax-exempt savings accounts allowing them to save money without affecting their eligibility for SSI. Currently, SSI limits eligibility for benefits to individuals that own no more than $2,000 in assets. For married couples this limit is $3,000 to remain eligible for SSI. With ABLE savings accounts, the money deposited will not count towards the asset limit imposed for SSI benefits eligibility.
Qualified disability expenses
Money in an ABLE savings account can only be used for what is legally considered a quality disability expense (QDE). This includes any expenses which help the account owner manage his or her disability. Expenses that maintain a disabled person’s health, quality of life or independence are considered QDEs. Education, transportation, housing, assistive technology, career training, financial services, administrative assistance and more can be counted as QDE purposes.
Generally, individuals are limited to holding up to $100,000 in their ABLE savings account before affecting eligibility for SSI benefits. Although going over the $100,000 limit will affect SSI eligibility it will not affect Medicaid eligibility. However, each state has different rules regarding limits on ABLE accounts. Therefore, you should check with the laws of the state administering the ABLE account in order to see how this fits into your situation or your loved one’s situation.
Usually, family members are the main contributors to ABLE accounts for the benefit of a disabled relative who may not be able to work for a living. However, there are limits to how much can be contributed to an ABLE account each year. Contributions from any sources, other than the beneficiary, are limited to $15,000 total annually. The ABLE account holder can contribute up to $12,760 of his or her own money annually if he or she lives in the continental U.S. The states of Hawaii and Alaska allow for a larger amount.
Is opening an ABLE account a good idea?
Whether or not you should open an ABLE account for yourself or the benefit of your loved one will depend on your financial circumstances and your specific needs. Obtaining the advice of a professional financial advisor can help you more clearly understand your options.
The information contained within this document has been obtained from sources considered to be reliable, but Raymond James does not guarantee the foregoing material is accurate or complete. You should discuss any tax or legal matters with the appropriate professional.