President Obama signs the ABLE Act, which allows those with disabilities to open tax-free savings accounts without putting benefits like Medicaid and SSD in jeopardy
President Obama has signed the ABLE Act. This is big news for people with disabilities who are receiving government benefits like Medicaid and Social Security and need peace of mind that they will continue. Now people with disabilities are able to open tax-free savings accounts – without risk of losing their benefits.
The President signed the Achieving a Better Life Experience (ABLE) Act before leaving Washington for the holidays.
The new law will allow people with disabilities to open special accounts where they can save up to $100,000 without risking eligibility for government programs. Further, they can keep their Medicaid coverage no matter how much money is accrued in an ABLE account.
A few caveats:
- The program applies only to those who have a condition that occurred before age 26.
- The law would suspend the payment of supplemental security income (SSI) benefits to an individual during any period in which such individual has excess resources in an ABLE account.
- While the new law changes federal rules to allow for ABLE accounts, each state must also put regulations in place, so financial institutions can make the new offering available. Lawmakers are predicting the completion around the end of 2015.
Funds can be used to pay for education, health care, wellness, transportation, housing, legal fees and other expenses.
Under current gift-tax limitations, as much as $14,000 could be deposited annually. Modeled after 529 college savings plans, interest earned on savings will be tax-free.
This is a wonderful development. It will help those with disabilities (who are eligible according to the age requirements) earn and save money without fear of losing their benefits. Previously, income and assets would affect the amount and continuation of governmental benefits, hindering many people from trying to go back to work, for fear of losing the extensive medical care and benefits they need to heal and survive.
Please also remember that if you’ve been injured in an auto accident, and you have a lawsuit for pain and suffering and No Fault benefits, applying for Social Security Disability can seriously affect your case.
It’s best to review all benefits you’re receiving – as well as changes and new applications – with your attorney, so you can get the most you’re legally entitled, and without negatively impacting your auto accident lawsuit.