The March issue of our AchievABLE Newsletter contains stories on the following:
- ABLE Age Adjustment Bill Reintroduced in U.S. Senate
- ABLE NRC Ambassador Highlight: Taylor Carty
- New Webinar: ABLE Program Spotlight: National ABLE Alliance
- ABLE Accounts and Special Needs Trusts Can Be a Winning Combination
- ABLE and Tax Benefits
- SSA WISE Webinar on ABLE Accounts
- NDI Scavenger Hunt: And the Winners Are…
- Webinar Archive: Strategies for Funding an ABLE Account
ABLE Age Adjustment Bill Reintroduced in U.S. Senate
On Tuesday, March 5, 2019, U.S. Senator Bob Casey (D-PA), joined by Senators Jerry Moran (R-KS), Chris Van Hollen (D-MD) and Pat Roberts (R-KS), introduced critical federal legislation, S. 651, the ABLE Age Adjustment Act, to dramatically increase the financial security and economic self-sufficiency of millions of Americans with disabilities. Consistent with the intent of the original ABLE Act, which was broadly supported by 78 U.S. Senators, the ABLE Age Adjustment Act will expand the number of individuals with disabilities eligible to open ABLE accounts. Under current law, only individuals with an age of onset of disability prior to turning 26 are eligible. S. 651 would increase the age limit up to 46 years of age, providing any individual whose disability onset began prior to turning 46 the opportunity to open an ABLE account. This important change will not only expand access for individuals with disabilities, but improve the long-term viability of ABLE programs by expanding the number of active accounts.
The Senators championing S. 651 made the strategic decision to limit the scope of the bill only to age adjustment and not to tackle other issues, but opportunities to deal with other matters may very well be on the horizon. National Disability Institute (NDI) has been advocating for additional critical improvements to the ABLE Act to ensure its success and maximize its utility for all people with disabilities. Specifically, NDI has been calling for a rollback of the so-called Medicaid payback provisions of current law which allows a state to seek reimbursement from a deceased individual’s ABLE account to cover costs associated with Medicaid services provided to the individual by that state. Since the ABLE Act’s enactment into law more than four years ago, a number of states have fortunately enacted state-level prohibitions against what many advocates refer to as “Medicaid clawback,” and still more states are considering their own bans or limitations on the practice. However, a patchwork of state-level prohibitions, critical though they may be, is an inferior approach to one establishing a clear national policy ensuring that contributions made to an ABLE account will not be possibly subject to seizure upon the death of the ABLE account owner.
In addition to an increase in the age of disability onset and elimination of the Medicaid payback provisions, NDI has also been calling on policymakers to, among other things, establish and fund education and outreach grants and similar efforts to promote the use of ABLE accounts, to settle on a central federal hub for information dissemination and cross-agency coordination and to allow employers to contribute to employee ABLE accounts with similar employer benefits in current practice with 401ks. Again, S. 651 only adjusts the age of onset of disability and does not address these other matters.
Advocates are encouraged to reach out to each of their two U.S. Senators to ask them to cosponsor S. 651, the ABLE Age Adjustment Act. As support for S. 651 grows in the U.S. Senate, all appropriate opportunities will be explored to advance the bill through the legislative process.
ABLE NRC Ambassador Highlight: Taylor Carty
Taylor Carty is a 23-year-old graduate from the University of California, Berkeley with a Bachelor of Arts degree in Molecular and Cell Biology. She is applying to medical school in June and will be taking the MCAT next week.
A planner and savvy saver, Taylor doesn’t want to take out significant loans once she is accepted into medical school. This is why she has been saving money for tuition in her ABLE account. However, as a result of a severe burn accident she had two years ago and her ongoing medical treatment, she knew that she couldn’t afford to lose Medi-Cal as her secondary insurance. For this reason, in November 2017, she opened her ABLE account in Pennsylvania and has been diligently contributing to it ever since. The Division of Vocational Rehabilitation (DVR) may be in a position to help towards that goal and with some planning and a little luck, Taylor hopes to graduate from med school debt free. Taylor is eligible for both DVR and an ABLE account as a result of her cerebral palsy.
According to Taylor, most people expect her to run away from medicine, having been surrounded by physicians, therapists and social workers most of her life. However, over the years she began to see that medicine is not just about treatment; it is a collaboration of ideas, theories, practices, commitment and, most importantly, collaboration. This realization was what made Taylor want to become a physician – one who not only advocates for her patients but who also helps to make healthcare more accessible.
Her parents and younger siblings have been her biggest supporters and advocates on her journey to pursuing her dreams. Whenever she gets discouraged, her mom always says: “If you think you can, you can.” Her dad makes her laugh and her siblings hesitantly volunteer to test her on bio and chemistry materials, even though she knows that it bores them to death.
Initially receiving Supplemental Security Income (SSI), Taylor switched over to Social Security Disability Insurance (SSDI) in October 2017 when her father turned 70 years old. At that point, she became eligible for child disability benefits. Taylor was thrown into the world of SSI, SSDI, Medicaid and Medicare. Through her own research and help from her family and the Department of Rehabilitation, she quickly became knowledgeable about the different rules, incentive programs and legislation that have so profoundly affected her life.
As one of our nine 2019 ABLE National Resource Center (ANRC) Ambassadors, Taylor wants to share with other ABLE-eligible young adults, as well as those eligible individuals she encounters in her role as a medical professional, how ABLE has changed her life.
Her own experience reading the information on the ANRC website and in the newsletters, watching the webinars and talking to different people, helped Taylor realize that an ABLE account would open doors for her that were previously closed. In her role as an ABLE NRC Ambassador, Taylor wants to share this information and her story to shine a light for others so that they can build their own bright futures as well.
“I was ecstatic when I first learned about the ABLE Act and the financial freedom it offered. It was an immense relief knowing that I can save for medical school while not having to worry about losing my Medi-Cal coverage or having to take out astronomical school loans. Because of my ABLE account, I will have a better and more financially secure future. After medical school, I plan to continue to use my ABLE account to save for a house, emergencies and retirement.”
New Webinar: ABLE Program Spotlight: National ABLE Alliance
Throughout 2019, the ABLE National Resource Center (ANRC) will be conducting a series of bi-monthly “ABLE Program Spotlight” webinars. These webinars are intended for those who already have a basic understanding of ABLE.
The first spotlight webinar will highlight the National ABLE Alliance (NAA), a 16-state consortium, plus Washington, D.C., that represents more than 25 percent of the nation’s ABLE-eligible population.
This presentation will cover:
- What the NAA is
- NAA program features and investment options
- Assessing your needs to get the most out of your NAA account
- Testimony from NAA account owners and authorized representatives
- Questions and answers
The webinar will be moderated by Miranda Kennedy, ANRC Director. Panelists include:
- Karen Austin, Deputy Treasurer, Iowa State Treasurer’s Office
- JJ Hanley, Director, IL ABLE
- Paul Souppa, ChFC, Senior Investment Analyst, Investment Management Ascensus Government Savings
- Lauren McClain, Business Development Specialist, TrustBank, Parent, Authorized Representative
- Wendy Settles, Peer Supporter and Disability Rights Specialist, IMPACT Center for Independent Living, Account Owner
ABLE Accounts and Special Needs Trusts Can Be A Winning Combination
This article was written by our partners at The Special Needs Alliance (SNA). The Special Needs Alliance is a national organization comprised of attorneys committed to helping individuals with disabilities, their families and the professionals who serve them. Learn more about the SNA: www.specialneedsalliance.org.
ABLE accounts and special needs trusts (SNTs) are both financial tools for managing funds without affecting an individual’s eligibility for such means-tested programs as Medicaid and Supplemental Security Income (SSI). But that’s pretty much where the similarity ends. They’re governed by very different regulations and many individuals wonder which to choose. Increasingly, families are opting for the benefits of both.
“So many of my clients are choosing both approaches that I’ve written SNT-to-ABLE distribution language into our standard trust documents,” begins former Special Needs Alliance President Brian Rubin. “We’re constantly getting questions about one versus the other, but it’s important to understand that there’s no one-size-fits-all answer.”
ABLE accounts are only available to individuals whose qualifying disability occurred prior to their turning 26, which leaves out a huge percentage of the special needs population. In addition, there are limits to both annual and lifetime ABLE contributions. On the other hand, beneficiaries can directly manage ABLE funds, unlike SNTs, which are managed at the sole discretion of a trustee. So increasing an individual’s autonomy ranks high on reasons to open an ABLE account.
“ABLE accounts can, for the first time, enable individuals with disabilities to handle their own resources without risk to benefits that may be important to their financial security,” says Rubin. “They can save for education, a computer or other expenses, and the guidelines for allowable distributions are very broad─anything to improve the beneficiary’s health, independence or quality of life.” He mentions a client whose siblings are trustees for his SNT. “They systematically move funds from the trust to the ABLE account, and that means he doesn’t need to ask them for money.”
“Families may begin by planning to contribute the annual maximum ($15,000 in 2019), but for many families of people with disabilities, it may be hard to come up with $15,000 to fully fund an ABLE Act account in any event” observes attorney Robert Fleming. For those who work and do not have an employer-sponsored retirement account, $12,140 in additional savings from income are allowed, for a total of $27,140, in 2019. In certain cases, more modest contributions could be wise, anyway. “For some individuals, there may be a money management learning curve, so funding the account with smaller amounts on a monthly basis may be better than seeding it up to the annual limit right away.”
“The special needs world changes dramatically when someone turns 18,” observes attorney Ann McGee Green. “Many individuals with disabilities first become eligible for SSI at the same time that other programs are no longer open to them. I’ve had situations in which parents who have already established a third-party SNT in their estate plan now want to protect a small Uniform Transfer to Minor’s Act account they previously created for their child’s benefit. This money cannot be placed into a third-party SNT. However, if that money is deposited into an ABLE account, the young adult can still qualify for SSI, as the account will not be considered a resource of the child.”
Another major advantage to ABLE accounts is that, unlike SNTs, they can pay housing expenses without affecting SSI (Supplemental Security Income), which is intended to cover food and shelter.
“No one in Roanoke, Virginia, where I practice, can cover those expenses with what SSI provides, so this is a really big advantage,” says Green. “I have clients who regularly move money from an SNT into ABLE in order to cover rent, utilities or maintenance. If they were to pay with an SNT, there would be a reduction in SSI as a result.”
Fleming describes the dramatic difference that this housing angle has made in one man’s life. “I have a young, very bright client with a severe disability, whose parents had established a third-party SNT for his benefit. He was receiving SSI and had qualified for Medicaid, but his health costs were largely being handled through his parents’ medical insurance. As he approached the age of 26, when he would no longer be covered by their policy, he wanted to be sure that he maintained his Medicaid eligibility.”
The SNT had purchased a house for the client, where he lived along with a roommate. But since the SNT was also paying to maintain the residence, his monthly SSI payments were reduced accordingly. By paying those bills, instead, with an ABLE account that was systematically funded by his SNT, his SSI payments rose and his Medicaid eligibility remained secure.
“The ABLE account gave him enormous liberty,” says Fleming. “He also used the ABLE account to bank the rent paid by his roommate and the salary he had from a part-time job. He’s computer-savvy, so he can pay his own bills online, and he has direct access to discretionary income. The two instruments, working together, have made a big difference.” Fleming points out that the rent payments reduced his client’s SSI payment but kept him on the program and in charge of handling his own bills.
Rubin has similar stories about individuals with third-party SNTs (funded with resources from anyone other than the beneficiary) who have used ABLE accounts to protect their earnings. “I have a number of clients who are receiving Childhood Disability Benefits (CDB) from Social Security based on a parent’s work record. As a result of the higher CDB benefit, their SSI terminated, however, they retained Medicaid, which is protected coverage. In many cases, paycheck savings, when combined with other resources, would exceed the $2,000 monthly limit for SSI resources, which is linked to this protected coverage. Caution: Earnings are countable income for SSI and subject to the earned income calculation for SSI. But earnings can be deposited into an ABLE account as savings for when they’re needed.
Handling an Inheritance
“In general, ABLE restrictions make such accounts impractical for handling large inheritances or personal injury settlements,” says Fleming, “but I had a case where there were two parts to a settlement. We opened an ABLE account to hold the smaller first portion, then created an SNT to hold the bulk.”
“For relatively small inheritances or settlements, an ABLE account can be more cost-effective and flexible than a pooled trust, which combines many sub-accounts belonging to multiple beneficiaries,” adds Green.
“I’m finding that many clients simply haven’t heard of ABLE,” comments Green. “Families dealing with significant disabilities are focused on getting through the day, so a lot of education remains to be done.”
If they’ve heard of ABLE, they may not be aware of the Medicaid payback, which requires that upon the beneficiary’s death, funds remaining in the account must repay Medicaid for healthcare handled by the program. “Some states have tried to invalidate the Medicaid payback,” says Rubin, “but the federal government has confirmed that it’s required and cannot be waived by states in many situations.” On the other hand, the payback is only for services provided since the account was established. This is less burdensome than the payback with first-party SNTs (created with a beneficiary’s assets), which involves health services throughout the individual’s life. On the other hand, there’s no payback from a third party SNT.
There are also misunderstandings with regard to tax advantages. In most states, the contributions to an ABLE account aren’t tax-deductible, although interest and capital gains are tax-free. “Taxes are seldom a good reason to create an ABLE account,” asserts Rubin. “Most individuals with special needs have limited tax exposure to begin with, and a properly drafted SNT shouldn’t have much tax liability either.”
One, Both, or Neither
“Neither an SNT nor an ABLE account is a panacea,” says Rubin. “Sometimes they’re great in combination, sometimes one or the other suffices, and sometimes an individual doesn’t need the asset protection provided by either of them.
For instance, if someone is receiving SSDI (Social Security Disability Insurance), there’s no asset test because it’s based on a parent’s or their own work record. Or, if they live in a state with a Medicaid buy-in program, they may qualify despite having significant resources. ABLE accounts may be a way for many working individuals to save for their retirement and maintain their eligibility for Medicaid, ensuring access to affordable health care.
Rubin also cautions that, in some states, the value of an ABLE account is compromised if an individual has a guardian, since the guardian would be required to approve all ABLE expenditures and make regular accountings to a court.
“Both ABLE accounts and SNTs are great tools, but families should take a hard look at their situations,” says Green. “Regulations are constantly changing, so they may want to consult a special needs attorney to help analyze their options. The bottom line, though, is that there are more ways than ever to enhance life for individuals with disabilities.”
ABLE and Tax Benefits
Tax season is in full swing and there is no better time to pick up some ABLE tax savings tips and develop ABLE account savings strategies. Some of the strategies involve tax credits which can easily be overlooked, but reduce the amount of income tax you owe. Better yet, tax credits can also result in a refund. Other deductions can provide even more options for saving!
Did you know that. . . .
- ABLE savings can grow tax-free.
- Some states allow residents a tax credit/deduction for ABLE contributions. You can search for this feature at Compare State Plans.
- ABLE account owners who work and deposit a portion of their earnings into their ABLE account may qualify for the Saver’s Credit.
- Individuals who work and earn income may qualify for the Earned Income Tax Credit.
- Some qualified disability expenses (QDE) may also qualify as taxable deductions for the ABLE account owner who works.
- There are free tax preparation services that can help people who work file taxes:
- Income tax refunds can be directly deposited into ABLE savings accounts.
- Some ABLE account owners receive IRS Forms 1099-QA or 5498-QA from their State ABLE program. These forms show ABLE account contributions and disbursements for the tax year. The information on the forms is in your year-end ABLE account statements, so do not hold up filing your return if you do not receive these forms. You do not have to send the forms with your tax return but hang onto them with the rest of your tax documents. The IRS issued instructions for the forms can be found on IRS.gov.
Tax professionals are encouraged to assist qualified individuals with disabilities to enroll in an ABLE plan and have refunds deposited into the ABLE account. Review the ABLE Accounts and Tax-Time Savings Quick Reference Guide for details. IRS Publication 907 provides details of many of these or other highlights for people with disabilities. By claiming all of the credits and deductions for which you are eligible, you can potentially reward yourself with a bigger refund or lower tax liability. Saving your refund in an ABLE account, where it can grow tax-free, provides a safety net in case of emergency and will help you become financially secure.
SSA WISE Webinar on ABLE Accounts
The ABLE NRC will share information about ABLE accounts and how they can work with the Ticket to Work Program in a Work Incentives Seminar Event (WISE) sponsored by the Social Security Administration (SSA) on March 27, 2019, from 3:00-4:30 pm ET.
This webinar will cover:
- How ABLE accounts may help certain people with disabilities and their families save for the future while protecting eligibility for public benefits
- Updates and changes to ABLE programs that may help you save more money
- How an ABLE account and Social Security’s Ticket to Work (Ticket) program can help you achieve financial independence through work
The Ticket program supports career development for people ages 18 through 64 who receive Social Security disability benefits (SSDI) or Supplemental Security Income (SSI) and want to work. SSA’s monthly WISE webinars offer the opportunity to learn more about Social Security programs, Work Incentives and other resources.
NDI Scavenger Hunt: And the Winners Are…
On February 14th, Valentine’s Day, National Disability Institute held the webinar, Share the Love, to officially launch its new website. The webinar wasn’t just a walkthrough of the new website and its features, however. The webinar culminated a two-week-long scavenger hunt of the website, where participants were challenged with answering 10 questions about NDI’s newly redesigned website to be entered into a chance to win a cash gift of $500 (1st Prize), $300 (2nd Prize) and $200 (3rd Prize). In order to be eligible, participants had to answer all 10 questions correctly and be present on the webinar to win.
If any winners were also verified ABLE account holders, they received an extra $100.
NDI’s Executive Director, Michael Morris, enthusiastically emceed the event, taking webinar attendees through the scavenger hunt questions and responses and then announcing the winners.
Because of a technical glitch, four winners were announced instead of three: David Kelly, David Lutz, Laura Witzig and Jessie Mabry. All four were also ABLE account holders!
David Kelly, our 1st prize winner, has an ABLE account with the Tennessee program. He plans on using the savings in his ABLE account to save for retirement, primarily, but to also build up his emergency fund.
David has paraplegia as a result of a 1987 car accident. He has had a career in the financial field for more than 30 years and is very active with various nonprofits both in and out of disability world.
David says he was very pleased, and surprised, to learn he was the first prize winner. He says it was a great event to showcase the website and that he hopes it achieved what NDI had hoped for (It did!).
He says he enjoys the new NDI website’s ease of use. As someone who works in the financial sector, he says it’s important to keep up to date with financial wellness and different programs and projects for advocates like himself and others.
David Lutz has an ABLE account with the Tennessee ABLE program and was our 2nd prize winner. He says he will use his ABLE account for long-term planning for future needs and for an emergency fund, now that he is able to save above public benefits asset limits.
David, who has a mental health disability, shared that he would like to restart his blog on anxiety.
His favorite part of the new NDI website is the Washington Insider newsletter, which he says has always been a big highlight for him. Other nice surprises were the free tax prep, archives of webinars and knowing that there’s one place he can go to find information or a lead on where to go. He intends to explore more of the website in the near future.
Laura Witzig’s ABLE account is with the Tennessee program and she says her main financial goal is to put aside whatever she can to finally have access to an emergency fund. She has a mobility disability.
For the scavenger hunt, Laura says she felt confident she got all the answers right and, though she wasn’t expecting to win anything, she put all her effort it into it anyway. That effort certainly paid off as Laura was our first 3rd prize winner!
Laura says that a useful resource section (on a website) should feel like stumbling upon a treasure chest and that NDI’s resources included plenty she hadn’t seen before. She promises to visit the site often and look for new helpful resources.
Jessie Mabry opened her ABLE account in Pennsylvania and plans on using her funds for short-term expenses and saving long-term, possibly for an accessible sailing excursion. When she heard her named called as our second 3rd prize winner, she says she felt thrilled, honored and glad to participate in a fun activity that had such a nice benefit. She says she also got to learn more about NDI, which she wasn’t aware of until opening her ABLE account.
Jessie, who is blind, says she really enjoys personal finance management, so she especially appreciates NDI’s mission.
She is looking forward to taking some of the free courses in NDI’s online classroom on the new website. Jessie says several of the courses seem useful for everyone, not just people with disabilities and those who work with them.
So congratulations again to our winners! We want to thank everyone who participated in NDI’s Share the Lovewebinar and the scavenger hunt. We appreciate your continued support of NDI’s mission to build a better financial future for people with disabilities and their families.
Webinar Archive: Strategies for Funding an ABLE Account
In conjunction with February’s webinar, the ABLE NRC released a case summary from attorney Jim Sheldon on “A Range of Strategies for Funding an ABLE Account.” The case summary is on the same page as the webinar archive.