Social Security Insurance – SSI and ABLE Accounts
As discussed in the previous post, individuals with disabilities who receive SSI must meet a “resource eligibility test” and show less than $2,000 in cash savings, retirement funds or other items of significant value. This resource limit has detrimental impact on an individual’s ability to work and prevents those receiving SSI from developing any kind of savings account.
In an effort to relieve the financial and emotional burden of the SSI resource limits test, there are several government approved financial vehicles which allow an individual to supplement his or her SSI benefits. These financial vehicles are ABLE Accounts, Special Needs Trusts and Pooled Trusts.
In this post, we will discuss ABLE Accounts. The ABLE acronym stands for the Achieving a Better Life Experience Act which was signed into law on December 19, 2014 by President Barak Obama. It amends the IRS code and allows for a tax advantage savings account to be established for, or by, individuals with disabilities. The purpose of this Act is to “secure funding for disability related expenses on behalf of designated beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance, Medicaid, SSI, the beneficiary’s employment and other sources.”
In order to establish an ABLE Account you must (1) either be the recipient of SSI/SSDI or show you meet SSA’s disability standard; and (2) show that the onset of your disability occurred prior to your 26th birthday. It is important to note, that you may establish an ABLE Account if you are currently older than 26 years old, so long as you can establish that you were disabled before your 26th birthday.
There is a limit on how much money can be held in an ABLE Account without jeopardizing SSI eligibility (NOTE: This limit does not affect Medicaid Eligibility). Only the first $100,000 is exempt from the $2,000 SSI resource limit. If the ABLE Account exceeds this limit, the individual would be suspended from receiving SSI. ABLE Accounts have the ability to grow and increase in value over time and any income interest earned is tax exempt.
The money in the ABLE Account can only be used for the benefit of the disabled person and must be considered a “qualified disability expense.” These acceptable expenses are education, transportation, employment training, assistive technology, personal support services and medical and dental expenses. The money from this trust cannot be used to pay for food, shelter or clothes. Should this occur than the disabled person’s SSI check can be reduced up $264.33 (in 2015) for the month the disabled person received the items.
ABLE Accounts also have a Medicaid payback provisions. Therefore, if at any time the disabled person becomes the recipient of Medicaid, upon his or her death, any funds left in the ABLE Account would first be used to pay the Medicaid Lien with any remaining money passing to the listed remainder beneficiary of the ABLE Account.
There are two other types of Trusts available to those receiving SSI which are discussed here and here. All three of these trusts have the same goal – to allow an individual to remain SSI eligible and still maintain a savings so it is still important to speak with a qualified Trusts Attorney about your specific needs and financial circumstances to help you find the right fit.