ABLE accounts were not created to replace a Special Needs Trust but are another useful tool to allow individuals with disabilities to maintain some financial assets while retaining eligibility for public benefits. The implementation and administration of ABLE accounts are determined by each state. NC ABLE launched on January 26, 2017, and is open to all who qualify nationwide.
Special Needs Lawyers
At Weaver, Bennett & Bland, we can help you with special needs planning and creating ABLE Accounts in North Carolina. Contact us today at (704) 844-1400 to meet with one of our experienced Elder Law and Special Needs Planning attorneys.
What is an ABLE account?
The Stephen Beck Jr., Achieving a Better Life Experience Act of 2014 created ABLE accounts. ABLE accounts are tax-advantaged savings accounts for individuals with disabilities and their families and which are based on college 529 Plans. They allow an individual with disabilities to open one account that is not countable as a resource when determining the individual’s eligibility for public benefits, such as Supplemental Security Income and Medicaid.
Unlike with Special Needs Trusts, the account beneficiary may manage the account, determine what distributions are appropriate, and directly use the account funds. The annual contributions to ABLE accounts, which are not permitted to exceed the annual gift exclusion, are made with after-tax dollars.
Are ABLE account distributions subject to income tax?
The income generated by the account is not subject to income tax as long as the distributions from the ABLE account are used for the beneficiary’s “qualified disability expenses” (QDEs) for the year. QDEs are defined as:
Any expenses related to the eligible individual’s blindness or disability which are made for the benefit of the disabled beneficiary, including the following expenses: education, housing, transportation, employment training and support, assistive technology and personal support services, health prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial expenses, and others approved by IRS regulations.