People with disabilities who are receiving SSI (Supplemental Security Income) benefits or Medicaid need to be careful about how they manage their funds because their benefits can be reduced or discontinued if they receive or save too much money. But it can be very difficult to meet monthly expenses without exceeding those limits. Even modest rent can consume most of an SSI payment, leaving very little for the other costs of living.
A new savings tool called an ABLE account can help. To learn more, we spoke with attorney Elisa Rainey of Rainey and Rainey, a Waco law firm specializing in elder law, estate planning, and special needs planning.
AC: Thank you, Elisa, for taking the time to talk with us. Let’s start from the beginning. What are ABLE accounts, and why were they created?
E: ABLE accounts respond to the need for individuals with disabilities to have the flexibility to manage some of their own money and for their families to provide money to them without jeopardizing their benefits. Money received via an ABLE account is not counted as income, and money saved in an ABLE account does not count toward the $2,000 asset limit for recipients of SSI and Medicaid.
ABLE accounts have not gained traction as quickly as we expected. Some people are skeptical and wary of falling for the latest gimmick. Families are weary and overwhelmed and sometimes don’t know if ABLE accounts are a good idea.
But I’m a huge believer in ABLE accounts. They offer so much opportunity for more independence.
Who is eligible to set up an ABLE account?
To qualify, the beneficiary has to have been disabled before the age of 26. It’s easiest to document disability if the Social Security Administration has found them to be disabled and if they have received SSI or SSDI benefits. But people can also have a medical professional certify severe and chronic mental or physical impairment before age 26.
How long have ABLE accounts been around?
The ABLE Act was passed in 2014. (ABLE stands for “Achieving a Better Life Experience.”) It was then up to the states to create their own respective systems. They are built on the same chassis as 529 accounts, which families can use to save for college education. One of the first systems was the Ohio ABLE account. Its brand name is the STABLE Account.
Can people get ABLE accounts in Texas?
Anyone in Texas can sign up for another state’s program if that state allows outsiders to do so. Most states don’t want to limit access because they need a lot of enrollees for the program to run efficiently.
Texas didn’t roll out its own program until 2018. I recommend Ohio the STABLE Account at this point because it’s been around longer and is more user-friendly at this point.
If people Google to find ABLE accounts, I want them to be aware of what they’re going to see online. It’s important to be sure you’re at the state site, not a third-party site. The Ohio site is www.stableaccount.com. The Texas site is www.texasable.org.
Who owns an ABLE account?
The beneficiary, or person with a disability, is considered the owner of the account. However, if the beneficiary has a legal guardian or someone exercising power of attorney, that person can establish and administer the account. A parent can administer the account even if they aren’t the legal guardian of an adult child, but if there is no legal guardian, it’s up to the beneficiary to decide who will administer the account, and they can choose to administer their own account.
Sometimes parents set up a special needs trust for a disabled child. How are ABLE accounts different from special needs trusts?
Unlike a special needs trust, an ABLE account is not expensive to create. You can basically set it up online. You have to provide some information, including a birth certificate and documentation of disability, such as a doctor’s letter or an approval letter from the Social Security Administration. The beneficiary or a family member or friend can set it up.
Also, an ABLE account isn’t as restrictive as a special needs trust. The funds can be used for a wider range of purposes, and the beneficiary can access the funds directly.
Some people have both a special needs trust and an ABLE account. It’s awesome for the trustee to be able to funnel money out of the trust and into the ABLE account, giving the beneficiary more independence and dignity to be able to manage their own money than they can have with just the trust arrangement. It’s a wonderful piece of the puzzle to provide for a disabled family member.
What about a beneficiary who has trouble managing money? What are the risks of an ABLE account in that case? How can those risks be reduced?
If someone really has a lot of trouble managing money, a special needs trust is a more secure way to keep them from accessing the funds, but if you’re looking for a way to channel a limited amount of money for rent or other expenses, an ABLE account is a great way to do it.
If you are administering an ABLE account, you can get a debit card that is linked to the account, and you can put restrictions on the card if you want to. You can set it up so the beneficiary can use it for anything, or for anything but cash withdrawals, or for anything but certain barred expenses, like alcohol or casinos.
If a beneficiary has a difficult time managing money, it is also good to limit distributions to the ABLE account to what they’ll spend immediately so they don’t let money accumulate in their own name, and thus violate the $2,000 asset limit for SSI and Medicaid.
Who can contribute to an ABLE account?
Anyone can contribute. The beneficiary can put their own money in, or the funds can come from parents, from a trust, from grandparents—anybody. If it’s the beneficiary’s own income from a job or legal settlement, putting it directly into the ABLE account doesn’t prevent it from being considered income when it’s earned. But if someone wants to give the beneficiary a gift, they can deposit the gift directly into the ABLE account so it doesn’t count as income.
I’ve heard of Circles of Support—groups of people who help someone meet their financial goals with an ABLE account. Do you have an example of this working well for someone?
I don’t know of any examples of someone creating a Circle of Support, but nothing would prohibit friends or other loved ones from adding money to the account. The total amount that can be deposited in a calendar year is $15,000. A working beneficiary can also contribute some of their own earnings above that amount.
Can you tell us a story or two about a situation in which an ABLE account was helpful to someone?
One young man had a very, very limited amount of money. His parents had set up an investment account with about $4000, but then he couldn’t qualify for benefits. It wasn’t enough money to justify the cost of establishing a special needs trust. So his parents closed out the investment account and moved the funds to an ABLE account, and then he was able to qualify for SSI with Medicaid.
Another young man inherited money from his mom and it’s in a special needs trust. This was very frustrating for him because he couldn’t access the inheritance. We were able to work with the trustee to establish an ABLE account. The trustee moves $15,000 per year to the ABLE account so the young man can access some of the inheritance money. Once he realized he could have up to $15,000 a year from the inheritance, he was satisfied.
This is very helpful information, Elisa. Where can people find more information about ABLE accounts and financial planning for people with disabilities?
The ABLE National Resource Center’s website is full of excellent information, some of it in video form. Locally, the law firm Rainey and Rainey specializes in elder law, estate planning, and special needs planning. People can reach us at 254-752-8644.