Understanding ABLE accounts

Legal Minute with Cooley Shrair

SPRINGFIELD, Mass. (Mass Appeal) –  Do you know what an ABLE account is? Attorney Susan A. Mielnikowski  from the Law Offices of Cooley Shrair in Springfield shared more about these kinds of retirement funds.

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What are “ABLE” accounts?

The “Achieving a Better Life Experience Act of 2014”, ABLE for short, became effective in 2015. The act permits states to establish a tax advantaged account for persons with certain disabilities. This is modeled after the Chapter 529 college savings account, so it is federally authorized but state administered.

ABLE is a newly enacted program, so we expect more regulations and refinements to be issued. We do know the following details:

  • Contributions are cash only.
  • Contributions are limited to no more than the federal gift tax exemption amount, currently $14,000 per year.
  • The disabled beneficiary has a limited ability to direct the investments.
  • The funds can be used to supplement the disabled person’s care and support, but will not supplant their ability to obtain public benefits. So even if someone has an ABLE
  • account at their disposal, they can still retain their benefits.
  • Funds can be used for qualified disability expenses, meaning expenses related to their disability, including education, housing, transportation, employment support, health, financial management and assistive technology.
  • Distributions and growth in an ABLE account will be income tax exempt.

Are these accounts available now?

The federal law was just enacted, so now it is up to each state to decide whether to adopt it. Virginia was the first state to adopt the ABLE act in March of this year. We expect Massachusetts will adopt the ABLE act in the coming year. It is something those who assist persons with disabilities, or who have loved ones with disabilities, will be watching closely, as this is definitely give disabled persons more flexibility to provide for services not covered by their public assistance.

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