In December 2014, the federal Achieving a Better Life Experience (ABLE) Act created a new type of tax-advantage account, the ABLE account, for individuals with disabilities. On June 1, 2016, Ohio became the first state to launch its own ABLE account available to eligible individuals nationwide.
What Is An ABLE Account?
Similar to 529 Qualified Tuition Plans for college savings, ABLE accounts are designed to encourage disabled individuals and their families to save money to help support the disabled individual’s needs, whether that means funds for their healthcare, independent living, etc. ABLE accounts allow eligible individuals to save money yet still qualify for needs-based programs, such as Medicaid or Social Security.
An eligible individual is defined as a person with a disability that occurred prior to age 26, and they must do one of the following:
- Be entitled to Supplemental Security Income (SSI) because of their disability,
- Be entitled to Social Security Disability Insurance (SSDI) because of their disability,
- Have a condition listed on the Social Security Administration’s List of Compassionate Allowances Conditions, OR
- Self-certify their disability and diagnosis when opening a STABLE account.
Distributions from the account should only be used for qualified disability expenses. Account earnings used for non-qualified expenses will be subject to income tax and a 10% additional tax.
How is an ABLE account different from a 529 education account?
- The account owner and beneficiary are the same (the disabled individual)
- Beneficiaries may only have one ABLE account
- Total annual contributions to the account max out at the annual gift tax exclusion, or $14,000 for 2016
- Accounts can be transferred to a new beneficiary only if the new beneficiary is an eligible individual and a member of the original beneficiary’s family
- Contributions can only be made in cash
- Contributions can only be accepted as long the beneficiary is an eligible individual
How Do I Enroll in Ohio’s New Plan?
Individuals with disabilities nationwide can now enroll in Ohio’s State Treasury ABLE accounts, known as STABLE accounts. The account will allow individuals to save on a tax-deferred and tax-free basis for qualifying expenses related to the disability, including:
- Basic living expenses
- Assistive technology
- Employment training
- Personal support services
- Legal fees
- Health and wellness
- Financial management
Before applying, there are a few additional items to keep in mind:
- STABLE accounts can be used in conjunction with special needs trusts.
- SSI benefits may be suspended if the STABLE account balance exceeds $100,000.
- Any person, business, employer, trust, corporation or other legal entity can make contributions to your account.
- Maximum lifetime limit is currently $426,000.
- Fees for the STABLE account are minimal but will vary based on Ohio residency status.
Residents and nonresidents of Ohio can submit an online application or learn more at www.stableaccount.com.
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