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Medicaid Planning, ABLE Accounts

The Achieving a Better Life Experience Act of 2014 (ABLE Act) was enacted on December 19, 2014 and it added § 529A to the Internal Revenue Code. Section 529A “allows a State (or State agency or instrumentality) to establish and maintain a tax-advantaged savings program under which contributions may be made to an account (an ABLE account) for the purpose of providing for the qualified disability expenses of the designated beneficiary of the account. ”

Benefits of ABLE Account

The ABLE account and distributions from the account will NOT be treated as income or resources for the individual in determining qualification for Medicaid benefits. The income earned in the ABLE account is not taxable and distributions made from an ABLE account for “qualified disability expenses” are not included in gross income for federal income tax purposes.

Eligibility Requirements

Generally, the designated beneficiary must have a disability that commenced before the designated beneficiary’s 26th birthday. The disability must be, “a medically determinable physical or mental impairment, which results in marked and severe functional limitations, and which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, or is blind. ”

Account Establishment

As “designated beneficiary” is defined as “the eligible individual who established an ABLE account and is the owner of such account, ” the disabled person is the one to open the account. As such, a proper power of attorney or parent or legal guardian can also establish the account. However, only one account can be opened.

Account Contributions

The total annual limit is $14,000.00 (the annual gift tax exclusion amount) and the contribution must be in “cash .”

Account Distributions

Distributions from the ABLE account may be made for “qualified disability expenses” which include the following expenses:

  • education,
  • housing,
  • transportation,
  • employment training and support,
  • assistive technology and personal support services,
  • health,
  • prevention and wellness,
  • financial management and administrative services ,
  • legal fees ,
  • expenses for oversight and monitoring, and
  • funeral and burial expenses.

ABLE Accounts in New York
Identical bills (S 4472-D / A 7767-B) passed on June 18, 2015, awaiting the Governor’s signature. These bills would create a new Article 84 of New York’s Mental Hygiene Law enacting New York’s ABLE accounts.

Aaron E. Futterman, CPA, Esq. is a partner in the law firm of Futterman & Lanza, LLP with offices in Smithtown, NY and clients throughout Suffolk, Nassau, Queens, Brooklyn, Bronx, Richmond, New York, Westchester and Rockland Counties. He concentrates his practice to Elder Law, Medicaid Planning, Medicaid Applications, Estate Planning, Probate, Estate Taxes, and Estate Administration.

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