There are two common tools that are used primarily to address the problems created by needs based government program eligibility. One of these is a Special Needs Trust, and the other is a savings account established under the ABLE Act (discussed below). As you may be aware, needs based benefit programs such as Supplemental Social Security Income ("SSI") and Medicaid health insurance coverage disqualify persons from benefits who make more than a certain monthly income (about $1071 per month) or have "resources" in excess of $2000. The term "resources" is defined to mean cash, bank accounts, stocks, bonds or items that can be readily converted into cash. This latter requirement has historically meant that people receiving SSI could not save money or they would lose their SSI benefit. To avoid this, they would have to "spend down" their money if the account got to a level over $2000 by buying things they really didn't need like another TV.

The Able Act. To address this problem of wasted money, Congress enacted the Achieving a Better Life Experience (the "Act") in December 2014. Texas adopted the enabling legislation and TexasABLE was signed into law by the Governor in June 2015. The Act permits persons receiving needs based benefits like SSI and Medicaid to save money without affecting their eligibility under certain circumstances. The Act is governed by Section 529(a) of the Internal Revenue Code and allows persons setting up these accounts to save money on a tax-deferred basis like a 529(a) College Savings Account.

Money (other than wages or Social Security benefits) deposited to an ABLE Account does not count as income for SSI purposes until distributed to the Beneficiary, and money held there does not count as a resource for purposes of the resource test. As long as the money is used for qualifying purposes, the growth in the account will not be taxed. Qualifying expenses include most things needed to enhance one's life such as gym memberships, vacations, computer equipment, televisions, cars, furniture, basic needs, etc.

ABLE Accounts are subject to the following requirements and are subject to the following limitations:

  1. The person who owns the account ("Beneficiary") must have been diagnosed with their disability prior to reaching the age of 26;
  2. Beneficiary must be a citizen of the United States;
  3. Beneficiary may have only one account;
  4. No more than $15,000 per year can be added to an account;
  5. Unused amounts in a sibling's or Beneficiary's 529(b) College Savings account may be rolled over to the ABLE Account;
  6. Accounts may not exceed $100,000 or Beneficiary loses SSI eligibility;
  7. Accounts may not exceed states' maximum college savings account amount (in Texas about $370,000) or the person will lose Medicaid eligibility; and
  8. Any amounts remaining in the account upon the Beneficiary's death must be used to repay Medicaid for any benefits extended to the Beneficiary during his or her lifetime.

You do not need an attorney's assistance to open an ABLE Account. You can go online to do so at ABLE Accounts are extremely useful tools for persons with disabilities. Some features include:
  • Direct deposit from Social Security? Or an employer
  • Prepaid debit cards for the Beneficiary
  • Checks

One would not be able to use ABLE Accounts in their estate planning however due to the annual limitation. You would not be able to deposit a lump sum in the Account and the limitations on amounts on deposit make saving enough for a lifetime of care impossible. To address these concerns, you would need a Special Needs Trust which are discussed on that page.