ABLE Accounts- tax advantaged for disabled, SSI Friendly! Any Experience?

[catccc]

I just found out about ABLE Accounts.  Tax advantaged investment/savings account for disabled individuals.  They work kinda like 529s in that they are tax deferred growth, state sponsored, and to be used for a specific type of expense.

I know that some disable recipients of SSI are resource tested- and if they have more than $2,000 to their name, they will not receive their SSI benefit.  This is an insanely low threshold.  Basically if you want to keep getting your SSI, you've got to be nearly living SSI check to SSI check.  The ABLE accounts allow individuals to save a little bit more- you can have up to $100K in an ABLE account and still receive SSI benefits.  (Yes, $100K is still sadly low, but it is 50x better than $2K!).  Contribution max is $14,000/year, and total lifetime limit for contributions is set by the sponsoring state.  Seems to be around $300K for the few states that currently offer ABLE accounts.

So far, Nebraska, Omaha, and Tennessee are the only states that accept enrollment from residents nationwide.  Maryland may be next in line.  I think Florida offers ABLE, but only to FL residents.  The legislation allowing ABLE accounts is relatively new (2014-2015).  Hopefully other states will follow suit and start sponsoring plans.

Does anyone have any experience with these types of accounts?  Know which ones of the existing plans are the best?  Does your state allow deductions for contributions to this type of plan?

I was thrilled to find out about this today.  I am close to someone that was permanently physically disabled as a teen, and he could really benefit from an ABLE account.  (I think the disability has to occur before age 26 to be eligible.)

More info at:
http://www.ablenrc.org/

[ltt]

I have had an interest in the ABLE accounts.  Am somewhat nervous about putting money in any account managed by the government and haven't made a decision yet.  Please note that if the person with the disability dies, the money goes to the government to pay back the Medicaid---I'm assuming it's the portion of the Medicaid that was used, and not all of the money in the account.  So, let's say you put in $10,000 into your friend's account, will the government take all that money should the disabled individual pass away?

Also, only the person who has the disability is on the account, so I'm not sure how it works if you are a guardian and would need to write checks on their behalf or do business on their behalf, unless there is some sort of power of attorney?

From what I hear, this is a good thing due to the $2,000 cap on an individual's assets (excluding car and home), but these are some questions that need to be asked.

[catccc]

Wow, did not know about the medicaid payback requirement.  That is a pretty big disadvantage.  Could still be good to mitigate some of the $2K resource limit for SSI payments.  But you probably don't want to sock away too much in an ABLE account, I guess.

[ltt]

Well, it's not necessarily a "bad" thing and there have been many people who have, apparently, been advocating for this type of account for years.  But, please know, that whatever the government has spent/rendered services to for the person in terms of Medicaid over their lifetime, that the money in the account will be repaid to the government/Medicaid first before it will ever be returned to the family--and I can't imagine that the process would ever be quick.

[catccc]

The disabled person I know is definitely interested, even with the Medicaid payback requirement- $2K is really not much, he has no cushion and is basically not allowed to have a cushion, so he could really use the option.  If he's deceased he won't need a cushion anymore, so the payback isn't a huge problem, at least the "losing" the money part of it.  I'm sure it isn't a quick process to figure out how much is owed to whom and settle everything.

it sounds like the investment options will vary by state, so it wouldn't necessarily be an account managed by the government, at least no more than a 529 college savings account is "managed" by the government.  Ohio's investment institution is Vanguard (investment choices are 4 diff. vanguard "lifestrategy" funds), Nebraska's is the state's investment council, and Tennessee has a a handful of investment institutions, including vanguard funds.

I think the debate for us is now wait for other states to start sponsoring plans, or pick one of the few currently available...

[ltt]

Yes, it will allow him to have a nice cushion above and beyond the meager $2k.  And, as long as he is happy with it, then he should give it a try.

[terran]

If I'm mistaken, like a special needs trust and gifts from people and organizations, money in a ABLE account cannot be used for food or housing or it will cause problems with reduction of SSI payments, so it can't be used as a true emergency fund option to get around the $2k limit since the most important expenses can't be covered. It could help out with vehicle emergencies and the like though.

[catccc]

Thanks for your input, terran!  I tried to find more info on this, and only skimmed over the link below; I'll have to fully peruse it later.  But at first glance, it is complicated!  There are rules about how to count combined resources, distributions and how they are spent, and when they are spent...  A lot of example scenarios with different outcomes.

https://secure.ssa.gov/poms.nsf/lnx/0501130740