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Curtis Shacklett: ABLE act allows savings accounts for disabled persons

Tulsa World (OK) - 2/12/2016

State Rep. David Brumbaugh, R-Broken Arrow, has introduced House Bill 2686, also entitled "The Disability Savings Act." Other lawmakers have introduced similar bills.

This proposed law is designed to put in place an enabling statute authorized by the ABLE act passed by Congress and signed into law by President Barack Obama on Dec. 19, 2014.

"The Achieving a Better Life Experience" act, or ABLE act, is designed to create another tool (among the very few available options) to allow certain disabled persons the opportunity to accumulate a savings account while being recipients of either SSI (supplemental security income) and/or Medicaid benefits.

SSI rules typically prohibit a person from accumulating more than $2,000 in resources. Many Medicaid programs follow the same rule. This makes it nearly impossible for a person receiving those public benefits to accumulate any inherited funds, cash gifts, or wages, above the $2,000 limit to pay for things that are not provided through public benefit programs.

The funds in an individual ABLE account are treated as a "non-resource" and more or less ignored by both SSI (with a limitation of $100,000) as well as Medicaid, thus, not violating the maximum $2,000 resource limitation.

Typically, an enabling statute empowers a state agency to manage the ABLE program, allowing a disabled person to save funds for "qualified disability expenses". Those expenses include education, health needs, housing, transportation, employment training and support, assistive technology, health prevention and wellness, funeral and burial, and basic living expenses.

The eligible individual ("designated beneficiary") can have only one ABLE account and he or she must be determined to have been disabled prior to the person's 26th birthday. At the death of the disabled individual, after payment of any outstanding qualified disability expenses, the remaining funds in the ABLE account are used to reimburse the state for certain Medicaid benefits received by the eligible person, similar to other Medicaid payback trusts.

Any person, including a trust or estate, can contribute to the ABLE account, however the IRS limits the total contributions to an ABLE account each year, from all sources, to not exceed the annual per-donee gift-tax exclusion - $14,000 for 2016.

The new ABLE statutory provisions are found in section 529A of the Internal Revenue Code. Any distribution from an ABLE account for qualified disability expenses is not treated as income and therefore does not threaten continued receipt of either SSI or Medicaid.

The Social Security Administration and the IRS are both preparing rules or regulations to provide guidance regarding ABLE accounts. At this point, 36 states, including Kansas, Texas, and Arkansas, have signed into law enabling statutes in order to provide opportunities for their disabled citizens to have a place to invest small or periodic inheritances, excess funds of their own, including wages, or gifts from family or friends.

Under certain rules and conditions, people with disabilities can also establish two other types of trusts to hold "excess resources," using what is called a pooled trust, as well as another form of a Medicaid payback trust typically known as a d4A trust.

However, the establishment of an ABLE account might avoid some of the complications as well as expenses associated with creating one of these other forms of Medicaid payback trusts that are also designed to hold excess resources.

The federal statute even allows a state, if it does not wish to establish its own ABLE account program, to pass a statute authorizing its qualifying disabled citizens, to more or less jump on board and utilize an ABLE account program in a sister state.

The ongoing expenses of the ABLE program are, typically, after being up and running, borne by the ABLE account owners.

The ABLE act was passed with overwhelming support in both houses of Congress. I hope our state representatives and senators will do likewise.

Curtis Shacklett is a Tulsa attorney.

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