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ABLE Act: Helping people with disabilities save, without putting gov. benefits in jeopardy

January 30, 2015 by Steven M. Gursten

New law allows the disabled to open tax-free savings accounts, while allowing benefits like Medicaid and SSI to continue


People who become disabled often face a major problem. If they acquire too many assets, then they face the possibility of government benefits being  cut off. This often puts people who have survived catastrophic injury in a terrible position that affects their lifestyle, health, state of mind, and personal dignity. If they go back to work or save too much money, critical governmental benefits are placed in jeopardy. If they have too much in savings, or a job that pays them over specific limits, they  may not be eligible for help in the first place.

As a personal injury attorney, I’ve seen first-hand what happens, especially in situations with disabled children. After a terrible injury accident, attention must be placed on security, special needs trusts and planning, which seek to maintain a special needs child’s eligibility for means-tested government assistance, such as Supplemental Security Income (SSI) and Medicaid programs.

Often, an attorney must work closely on other aspects of general settlement planning that can affect Medicaid and Medicare rights, and estate issues and probate administration.

Children, and the parents of disabled children, are particularly hard-hit by this problem. Parents often cannot save money for their children if they want to receive government health benefits like Medicaid, due to the low income and asset requirements to be eligible.

The system as it is was discourages people with disabilities from saving because they risk losing the means-tested government benefits that keep roofs over their heads and provides the medical coverage they need to survive.

But that’s now going to change.

President Obama  signed the ABLE Act (Achieving a Better Life Experience), which allows people with disabilities to open tax-free savings accounts – without risk of losing some of their benefits.

In these special accounts, people with disabilities can save up to $100,000 without risking eligibility for some government programs. Further, they can keep their Medicaid coverage no matter how much money is accrued in an ABLE account.

Beware of 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 benefits to an individual during any period there’s excess resources in the 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 accounts 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, according to the Congress webpage on the ABLE Act.

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.

As an attorney, I believe this is an extremely important development that reinforces the rights and the dignity of people with disabilities and encourages them to seek employment. It’s a positive change in an area that desperately needed reform.

Automobile Accident lawsuits and when to apply for Social Security Disability

Please also remember that if you’ve been injured in an auto accident, and you have hired an attorney to file a lawsuit for pain and suffering and No Fault insurance benefits, applying for Social Security Disability can have a dramatic affect on your case. It’s best to carefully review when you apply for Social Security Disability with your attorney, so you can recover all that you’re entitled without negatively affecting your auto lawsuit and without the insurance company claiming the right to a set-off in your auto accident lawsuit.

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