MSU Extension Office: Tax-Free Savings Accounts for Disabled Individuals

The Achieving a Better Life Experience Act (ABLE) became federal law on December 19, 2014. The Montana legislature the passed an act by the same title. An ABLE is a savings account allowing a person with a disability to save money without risking a decrease in state and federal benefits. The law aims to ease financial strains faced by individuals with disabilities by making these tax-free saving accounts available to cover qualified disability expenses.

The designated beneficiary of an ABLE account is the individual who owns the ABLE account. To be eligible the person must be:

• receiving Supplemental Security Income (SSI) based on blindness or disability that began before age 26.

• in SSI suspense due solely to excess income or resources but otherwise eligible for SSI based on blindness or disability that began before age 26.

• receiving disability insurance benefits (DIB), childhood disability benefits (CDB), or widows with disabilities or widower’s benefits (DWB) based on blindness or disability that began before age 26.

• the subject of a disability certification. A disability certification is signed by the individual or someone else setting up the ABLE account for the individual. This document certifies the individual is blind or has a physical or mental impairment that results in marked and severe functional limitations and that such blindness or disability began before age 26.

A statement must be included stating the individual has a copy of the diagnosis relating to their relevant impairment(s), signed by a physician.

An eligible individual may have only one ABLE account. Any person may contribute to an ABLE account for an eligible beneficiary. Typically, contributions for an ABLE account may not exceed the annual gift tax exemption ($17,000 in 2023).

However, if the beneficiary is working, and they or their employer are not making certain retirement plan contributions, the beneficiary may contribute an additional amount equal to the lesser of their annual compensation or the individual Federal Poverty Level for a one-person household in their state of residence ($13,590 in Montana for 2023.)

A distribution is a withdrawal from an ABLE account. Distributions are only to or for the benefit of the designated beneficiary. A person with signature authority, for example, a parent, can set up and control an ABLE account for a designated beneficiary who is a minor child or is otherwise incapable of managing the account.

Qualified disability expenses (QDE) are expenses made for the benefit of the designated beneficiary and related to their disability, including, but not limited to:

• Education

• Housing

• Transportation

• Employment training and support

• Assistive technology and related services

• Health

• Prevention and wellness

• Financial management and administrative services

• Legal fees

• Expenses for ABLE account oversight and monitoring

• Funeral and burial

• Basic living expenses

The ABLE National Resource Center provides information for employers who want to share and contribute to the financial security of employees affected by the added expenses associated with having a disability. The Center supplies an ABLE Employer Toolkit: https://www.ablenrc.org/employers/employer-toolkit/#

Information about Montana ABLE accounts is available here. https://savewithable.com/mt/home.html The National Resource Center for ABLE is here https://www.ablenrc.org/.

For those who do not have computer or printer access, a copy of the article is available from the Madison-Jefferson County Extension office at 287-3282.