As 2014 comes to a close, we begin a new chapter for people with disabilities. The Stephen Beck, Jr. Achieving a Better Life Experience (ABLE) Act was passed by both the House of Representatives and Senate by overwhelming majorities, and signed into law by President Obama late last week. This means families will be able to save for individuals with Down syndrome and other disabilities through 529-style savings accounts, without affecting their government benefits. Below is a brief FAQ to explain more about ABLE accounts.

What is an ABLE Account?
ABLE accounts are savings accounts for individuals with disabilities into which after-tax contributions can be made.  These accounts were designed with a recognition of the extra expenses that an individual with a disability may incur.
 
These accounts may be used for "qualified disability expenses", which means any expense related to the designated beneficiary as a result of their disability. These include education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services and other expenses which will be further described in regulations to be developed in 2015 by the Treasury Department.

What are the tax ramifications of these accounts?
Contributions to an ABLE account would have to be made in cash from the contributor's after-tax income.  Earnings on an ABLE account and distributions from the account for qualified disability expenses would not count as taxable income of the contributor or the eligible beneficiary.

Who would qualify for an ABLE account?
The ABLE Act limits eligibility to individuals with significant disabilities who became disabled before turning 26 years of age.  If you are not a recipient of SSI and/or SSDI, but meet the age of onset disability requirement, you would still be eligible to open an ABLE account if you meet SSI criteria regarding significant functional limitations.

Who can create and contribute to an ABLE account?
A family member, friend, or a person with a disability could establish an ABLE account for an eligible individual.  An individual may have only one ABLE account, which must be established in the state in which he lives (or in a state that provides ABLE account services for his home state).

Is there a limit to the amount of money that may be put in an ABLE account?
The maximum contribution for an ABLE account is $14,000 per year.  If an ABLE account exceeds $100,000, the eligible individual's SSI benefits will be suspended.  He or she will not lose eligibility, however.

When will individuals be able to set up an ABLE account?
The Department of Treasury will begin to develop regulations, most likely in 2015, that will guide the states in terms of a) the information required to be presented to open an ABLE account; b) the documentation needed to meet the requirements of ABLE account eligibility for a person with a disability; and c) the definition details of "qualified disability expenses" and the documentation that will be needed for tax reporting.

No accounts can be established until the regulations are finalized, following a public comment period on proposed rules for program implementation.

How is an ABLE account different from a special needs or pooled trust?

• A special needs trust generally must be established by a lawyer, so the cost of establishing an ABLE account is much lower.  
• The special needs trusts also protect the individual from loss of federal benefits.
• The funds from a special needs trust may be left to any beneficiary, whereas an ABLE account may only be left to another qualified ABLE account holder.  
• An ABLE account beneficiary will have the ability to control their account. For many families, the ABLE account will be a significant and viable option in addition to, rather than instead of, a trust program.
• There is no payback or limitation on who the account can be left to in the special needs trust.

What does "payback provision" mean?
The payback provision means that any funding for services for an individual during his or her lifetime, must be paid back from the remaining funds in the account to the state Medicaid agency.