Individuals with special needs and their families often face significant financial challenges. In the past, there were unavoidable restrictions placed on the income and assets a special needs family member could have to qualify for essential government benefits. But as of 2014, the Stephen Beck, Jr., Achieving a Better Life Experience (ABLE) Act now allows eligible special needs individuals to save money for expenses without putting their SSI and Medicaid benefits in jeopardy.
If you’re considering opening an ABLE account, especially to complement an estate plan for an adult with special needs, consulting with a knowledgeable estate planning lawyer can be beneficial in making informed decisions. At The Matus Law Group, our New Jersey estate planning attorneys can assist individuals with special needs and their families in understanding and setting up ABLE accounts. We can address any relevant concerns and help manage associated requirements and rules. Contact us today at (732) 281-0060 to schedule a consultation.
What Are the Advantages of ABLE Accounts?
ABLE accounts are savings accounts designed to assist special families in saving private funds to maintain the health, independence, and quality of life for their loved ones while still maintaining eligibility for their critical government assistance. For those who have been diagnosed with a disability before the age of 26, funds saved in an ABLE account, up to a certain threshold and spent properly, will not affect their eligibility for public benefits for the special needs individual.
Funds in an ABLE account will not be regarded when determining eligibility for many government benefits, including SSI, Medicaid, Section 8 housing, food stamps, DDD, or other benefits. Deposits into the account and payments from the account allow the special needs individual independence while maintaining their benefits. In addition, any income earned on funds in the account is tax-deferred.
| Advantage | Description | Key Considerations |
|---|---|---|
| Eligibility for Public Benefits | Funds in ABLE accounts do not affect eligibility for SSI, Medicaid, Section 8 housing, food stamps, or DDD. | Ensures access to critical government assistance while maintaining savings for the individual. |
| Tax Benefits | Income earned on funds in the ABLE account is tax-deferred. | Maximizes the value of saved funds for long-term use. |
| Financial Independence | Allows deposits and payments to provide independence while securing benefits. | Proper management and approved expenditures are essential to maintain benefits eligibility. |
| Flexible Spending | Funds can be used for health, housing, education, transportation, and other approved expenses. | Misuse of funds could jeopardize access to government benefits. |
Who is Eligible for an ABLE Account?
There are two specific requirements for an individual to be considered eligible to open and maintain an ABLE account in New Jersey. First, the person qualifying for the account must have been diagnosed with a disability by a competent healthcare provider before their 26th birthday. Secondly, the disability must have functional limitations that are expected to last for a year or more or meet disability requirements under SSI or SSDI.
How to Open an ABLE Account in New Jersey
Opening an ABLE account in New Jersey can be initiated by eligible individuals or their authorized representatives, such as a parent, legal guardian, or someone holding a valid power of attorney.
The first step involves filling out an Enrollment Form, which can be done online or by mailing a paper form to the Program Manager. The account owner needs to meet certain requirements, including being a U.S. citizen or resident alien, possessing a Social Security number or tax identification number, and maintaining a valid permanent street address within the U.S., its territories, or on a U.S. military base.
During the enrollment process, you may need to provide additional documentation for account verification. This could include a doctor’s signed diagnosis confirming the disability or a benefits verification letter from the Social Security Administration. These documents confirm the account holder’s eligibility under the ABLE program guidelines.
Additionally, opening an ABLE account requires an initial contribution of at least $25. This initial deposit is a modest requirement to establish the account, allowing the account holder to start benefiting from the program’s features.
Through these steps, individuals in New Jersey can set up their ABLE accounts to secure financial stability and gain access to a tool that supports health, independence, and quality of life.
What Expenses Can Be Paid Out of an ABLE Account?
Any distributions from an ABLE account must be considered qualified disability expenses, defined by the Social Security Administration as those used to maintain or improve the individual’s health, independence, and quality of life. These can include:
- Housing
- Health
- Education
- Transportation
- Employment training
- Personal support services
- Assistive technology
- Financial management
It’s important to understand that any distributions not considered qualified disability expenses may be subject to a 10 percent penalty at tax time and also may affect overall eligibility for critical benefits.
Limitations to an ABLE Account
Anyone can make contributions to the ABLE account on the owner’s behalf. Family members and even friends can donate funds to an individual’s ABLE account. However, there are limitations to the annual amount that can be deposited into the account on the beneficiary’s behalf as well as limitations on the total value of the account without affecting SSI and Medicaid eligibility.
Furthermore, if the special needs individual dies and leaves funds in the account, these must be used to reimburse the state of New Jersey for Medicaid payments made on the beneficiary’s behalf unless it is specifically left to an immediate family member with a disability.
Getting Skilled Legal Assistance
For families considering an ABLE account for a special needs family member, it is advised to work with an experienced estate planning attorney well-versed in managing cases involving special needs. At The Matus Law Group, our New Jersey estate planning lawyers understand the financial needs of special needs families and can help them handle this often confusing matter. Call us today at (732) 281-0060 or through our online contact form to schedule a consultation to discuss ABLE accounts or any special needs financial concerns.
