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ABLE accounts: Smart choice for some people with disabilities

For years, to preserve eligibility for Supplemental Security Income or SSI, a federal government cash benefit, and the federal-state Medicaid program -- called Health First Colorado in our state -- people with disabilities have had to remain relatively impoverished. Usually, this has meant not exceeding $2,000 in countable assets. 

This has caused people to spend money to maintain benefit eligibility when they otherwise might have saved it for emergencies, investment or costlier purchases. It has also prevented people with significant disabilities from saving money for large expenditures that could benefit them.

These programs provide crucial financial support, usually to cover residential services and health care, for people with disabilities, so maintaining eligibility is equal to maintaining a lifeline. 

ABLE Acts 

After much activism by advocates for people with disabilities, Congress passed the Achieving a Better Life Experience Act of 2014, known as the ABLE Act and later amended by the recent federal tax reform bill. The legislation allows the creation of new "ABLE accounts" that allow people with serious disabilities to save more money without disqualification for SSI and Medicaid, so long as they are eligible and comply with the ongoing requirements of the terms of the accounts. 

We have previously written about Colorado legislation that followed the federal ABLE Act and allows the establishment of an ABLE program in our state. Earnings on ABLE accounts are not taxable unless the owner uses withdrawals for something other than qualified disability expenses. 

Eligibility and terms 

Colorado's program is Colorado ABLE, which offers a range of investment options. 

A person is eligible to open an ABLE account if he or she developed a qualifying disability before he or she turned 26 years old. The disability can be established by approval for SSI or Social Security Disability Insurance or SSDI based on blindness or disability or, if not on SSI or SSDI, by having a "similarly severe disability" that would meet Social Security's definition of disability, according to Colorado ABLE. In addition, the account owner's diagnosis must be in writing and signed by a doctor. 

The disabled account owner (or his or her legal representative like a conservator) may contribute up to $15,000 in a calendar year. Parents, grandparents, siblings and other family and friends may also contribute to the account.

For an update on contribution amounts, please read our December 2018 post.

The law does not penalize owners for making withdrawals for "Qualified Disability Expenses" or QDEs that are those related to having a disability or that would improve the disabled account owner's quality of life such as those for: 

  • Assistive technology
  • Personal supports
  • Health
  • Housing
  • Transportation
  • Legal fees
  • Monitoring
  • Burial and funeral plans
  • And more 

Generally, Coloradans will remain eligible for Medicaid no matter the size of their ABLE accounts, but SSI considers amounts over $100,000 in the accounts to be resources that count against SSI eligibility, so the Social Security Administration could suspend SSI payments at that account level. Colorado ABLE accounts may not exceed $400,000, as of the date of this writing. 

This only introduces an extremely complicated topic. Anyone with disabilities or who has a loved one with disabilities should seek legal advice about whether an ABLE account is a good idea in their situation.   

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