Important Information on ABLE Accounts for Special Needs Planning
ABLE Accounts are tax-advantaged savings accounts for those who have disabilities. These accounts can help those with a disability, along with their families, better plan their future. These accounts were created because of the Stephen Beck Jr., Achieving a Better Life Experience Act of 2014, also known as the ABLE Act.
Unlike other accounts, the income that accumulates in these accounts cannot be taxed. Contributions by any person, including family and friends, into the account will be made with post-taxed dollars that are not tax deductible apart from a few states that allow for state income tax deductions for the contributions.
Why Are They Necessary?
More millions of people in the country that have a disability, their lives become reliant on public benefits for income, health care, and food and housing assistance. The eligibility for those benefits can require meeting a means or test which requires them to report less than $2,000 in savings. To remain eligible for these benefits, the individual must remain poor, which is a huge disadvantage for the disabled people in our country. Living with a disability often is a much higher cost of living than those who are deemed able-bodied.
The ABLE Act recognizes these hardships. For families with someone in their household with a disability, they lose out on a lot of the benefits that were made for the individual simply because they took them in. Under the ABLE Act, eligible individuals are allowed to create ABLE savings accounts that don’t affect their eligibility for SSI, Medicaid or other public benefits. Instead, these are private savings that secure funding for the high cost of disabled living and allow individuals to save up money.
Are There Limits to How Much Can Be Added to an ABLE Account?
The limit for all contributions annually into an ABLE account is $14,000. However, this amount is likely to be adjusted over time to account for inflation. This number is based on the current tax law that $14,000 is the maximum amount an individual can gift to another person without reporting the gift to the IRS.
The overall limit on how much an ABLE account varies from state to state, with most setting this limit at over $300,000. Those who are recipients of SSI have further limitations. For instance, the first $100,000 put into the account would be exempted from the SSI $2,000 resource limit. When it goes over the amount, the SSI cash benefit would be suspended only until the account fell back to $100,000 or less.
If you or a loved one is considering setting up an ABLE account but have questions about your SSI benefits, we can help. Contact our attorneys at Jonathan Perkins Personal Injury Lawyers today.