People with severe disabilities can require significant physical, emotional, and financial aid. Many disabled persons find financial help through government programs, like Social Security, Medicare and Medicaid. However, these and other government programs require that the beneficiary have limited assets and income to enroll and stay eligible. This can feel like a catch-22, as disabled persons need a lot of money to take care of their needs, but they also must limit their assets and income to stay eligible for government aid. ABLE accounts are one potential solution to this difficult problem.
ABLE accounts are savings accounts that are available to disabled persons and their families. Similar to Roth IRA accounts, money is taxed before it is placed in the ABLE account, meaning that the money in the ABLE account can grow tax-free and income made from the account is not taxable. Although ABLE-accounts get preferential tax treatment, the real benefit stems from the fact that the value of an ABLE account is not counted when determining eligibility for government programs. More on this below.
When determining net worth, the government counts that person’s traditional savings and retirement funds and therefore, the value of those accounts could impact their eligibility for government aid. This is because the government wants to use its money efficiently and doesn’t want to give money to people who “don’t need it.”
If a disabled person has a million dollars, for example, the government would rather use its resources to fund other disabled persons who have less. In short, a resource test attempts to disqualify an individual from a government program by valuing their assets.
While the government wants to make sure that they use their money wisely, they also understand that someone with a disability typically has significant financial needs. Therefore, the ABLE Act was put in place in 2014, and part of this act allows disabled persons to hold ABLE savings accounts, and these accounts can hold up to $100,000 before the beneficiary is exempted from Supplemental Security Income (SSI) and other government programs.
Therefore, ABLE accounts allow disabled persons and their families to store savings but still pass resource tests to qualify for a variety of government programs.
Although ABLE accounts are hugely beneficial for disabled persons, the process of enrolling and maintaining an ABLE account can be difficult. Chestnut Hill Legal is ready to help, serving families just like yours all over the Philadelphia area.
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