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By now you have most likely heard about the ABLE (Achieving A Better Life Experience) Act moving its way through the Oregon Legislature this session. The ABLE Act creates a new section of IRS tax code to establish new tax-favored accounts. Assets in an ABLE account and distributions from the account for qualifying expenses would be disregarded or receive special treatment when determining the beneficiary’s eligibility for most federal means-tested benefits. ABLE accounts will provide a low cost alternative to special needs trusts that will allow individuals and families experiencing disabilities to save money while preserving eligibility for public benefits. These  accounts will be set up and administered by the State of Oregon through the Treasury Department as a 529 plan, similar to the 529 college savings plans.

There is still a lot of work to be done before these plans become a reality in Oregon. Of great significance is the fact that the federal IRS regulations relating to these accounts have not yet been drafted, nor have any guidelines for administration been published by the Social Security Administration or Medicaid Services. So, although the federal law was approved in December, and it is likely that the Oregon bill will be approved before the end of this legislative session, it may be quite some before ABLE accounts are available to Oregonians.

While the ABLE accounts will certainly provide a viable alternative for many individuals and families, they will not be right for everyone, the same way that a special needs trust is not right for everyone. It is important to have all the facts before making a decision as to which way to go. Below is a general comparison chart to help you understand the differences between the two types of accounts.

Comparison Chart

FEATURE

ABLE ACCOUNT

POOLED (OSNT)

MEDICAID PAYBACK

ALL funds subject to payback from opening date of the account

1st Party: All funds not retained by the trust

3rd Party: NO payback requirement on family-funded accounts

DISBURSEMENTS

Qualified Disability Expenses ONLY: education, housing* (reduction in benefits), transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services

All of the same things allowed in ABLE accounts, PLUS broader range of supplemental needs including travel, electronics, entertainment, etc., to enhance the beneficiary’s quality of life

COSTS

Low costs expected but unknown at this time

Most likely higher than ABLE but lower than Private Trusts

FUNDING

Limit of $14,000/year

Asset Cap of $100K for SSI

Maximum balance of $310K

No minimum or maximum limits

CONTROL

Beneficiary

Trustee

ELIGIBILITY

Disability must have occurred BEFORE age 26

1st Party – Under age 65

3rd Party – No age limit

NUMBER OF ACCOUNTS

One

Unlimited

CLOSURE/

CANCELLATION

May be possible w/payment of taxes/penalties or Rollover

Irrevocable

Death or Depletion of funds

*Important! Although housing benefits are listed as an allowable expense, the same rules would apply as with a special needs trust. That is, if housing payments are made, SSI benefits would incur a one-third reduction for the month in which housing payments are made.

Unknowns

There are still quite a few unknowns when it comes to how the ABLE accounts will work. For example, establishing a special needs trust account with a beneficiary’s assets for an individual who is not competent requires a court order but at this time, it is unclear who will have legal authority to establish an account with assets of an individual who is not competent to do so on his or her own. Additional questions that need to be answered are:

  • What is the exact definition of a “Qualified Disability Expense”?
  • What documentation of expenses will be required for reporting purposes?
  • Who is responsible for reporting disbursements from the account?
  • Will beneficiaries over the age of 65 be able to continue to deposit funds into an ABLE account?

More to Come

We will continue to monitor the progress of the ABLE Act legislation in Oregon and bring you updates and new information as it becomes available. Stay Tuned!

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