Introduction
- The Achieving a Better Life Experience (ABLE) Act enables independence and self-reliance for persons with disabilities.
- The Act allows the creation of an ABLE account which helps fund persons with disabilities to save money and control their quality of life and future.
ABLE accounts have become enormously popular. States that have implemented ABLE programs report thousands of participants and millions of dollars being saved by persons with disabilities. More than 34 states, including New Jersey, have started ABLE programs, with more states joining on a regular basis.
ABLE accounts allow persons with disabilities to save money without jeopardizing their eligibility for public benefits. ABLE account income grows tax-free annually and if spent on qualified disability expenses (QDEs) remains tax-free. Persons with disabilities are in control of their own accounts subject to certain reasonable limitations which gives the disabled person greater self-determination in their financial futures.
ABLE Accounts Have Certain Restrictions and Requirements
Reasonable but strict limitations apply to an ABLE account. An ABLE account can only be used by persons who became disabled prior to age 26 and must be funded with cash. The maximum funding amount each year is limited to the annual federal gift tax exemption amount ($15,000). For Supplemental Security Income (SSI) eligibility purposes, an ABLE account is exempt up to $100,000; for Medicaid-only eligibility purposes, it is exempt up to a state’s 529 plan limit. In New Jersey, this figure is $100,000 (indexed annually for inflation). If ABLE account income is spent on non-QDEs, it is taxed, and a penalty is assessed, and on the death of the person with a disability, payback to the state Medicaid agency applies. An ABLE account can be used together as an effective special needs trust based plan.
To discuss your NJ ABLE account options and/or a special needs trust matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq., of Hanlon Niemann & Wright, a Freehold Township, Monmouth County NJ Special Needs Trust Attorney