05 Jan CONGRESS PASSES ABLE ACT EFFECTING MEDICAID APPLICANTS AND SPECIAL NEEDS TRUSTS
On December 16, 2014, Congress passed the Achieving a Better Life Experience Act (ABLE) which allows adults and children with disabilities whose disability occurred before age 26 to shelter up to the annual gift tax exclusion amount (presently $14,000) per year into an account which is tax free which will not count as a resource for public benefits programs such as Supplemental Security Income (“SSI”) and Medicaid. This is different than contributions to special needs trusts since gifts to a special needs trust are considered a future interest, and thus such a gift would not qualify for the annual exclusion. Since the amount that could be contributed in one year is less than $14,000, the donor would not need to report the gift (for gift tax purposes) to the IRS. There can only be one ABLE account, and the first $100,000 would not be considered for eligibility for federal programs such as Supplemental Security Income (which normally permits the applicant or recipient to only have $2,000 of countable resources). Withdrawals for qualified disability expenses (such as health care, education, wellness, legal fees, etc.) would also not be a disqualifying event. Anyone can contribute to the one account. On the death of the beneficiary, the balance is repaid to Medicaid and the state for services provided after the ABLE account was established. So, this should be considered a Medicaid pay back account. These accounts are somewhat similar to 529 accounts used to fund college education. States will be offered the option if they want to participate in this program.
Under present law, individuals must have less than $2,000 in countable assets for SSI and Medicaid. As a result of this law limit, many who are disabled have chosen to work less or be paid less so that they could get valuable social support benefits. The purpose of this Act is the encouragement of saving private funds to support individuals with disabilities to maintain health, independence and quality of life and to provide secure funding that supplement, not supplant, public benefits.
If you are a loved one are needing help with a Medicaid application or special needs trusts, contact our Dallas, Texas office at 214-720-0102.