ABLE Accounts In Massachusetts

The Achieving a Better Life Experience Act, or ABLE Act, signed into law in 2014, will soon be launched in Massachusetts. Account values in these savings accounts, up to $100,000, will be disregarded in determining eligibility for means-tested government programs such as supplemental security income (SSI). Contributions for individuals with disabilities that began prior to the age of 26 will be post-tax, but all qualified distributions will be tax-free. Contributions, however, are limited to $14,000 per year from any source.

Although the ABLE account is a positive planning tool for individuals with disabilities, there are some limitations that you need to consider. First, Congress limited annual contributions to $14,000 total. Second, unlike third party special needs trusts, there is a Medicaid payback provision for benefits paid out on behalf of a beneficiary.

Even with these limitations, there are several scenarios where an ABLE account can be used to benefit families. First, disabled adults that are working can use the account to shelter the earnings that may push them above the SSI asset limit of $2,000. Even better, unlike a pooled special needs trust account, the disabled individual can control the account themselves. Second, ABLE accounts may be useful to families who want to gift small amounts and do not want to incur the costs of establishing a special needs trust. Please keep in mind, there is a Medicaid payback provision with ABLE accounts, so you must discuss with your attorney or advisor whether it makes sense to set up an ABLE account or special needs trust.

ABLE accounts, if used properly, will be a very useful planning tool for families. As with any estate planning, a thorough analysis must be done to determine what planning strategies should be used, including ABLE accounts.