The ABLE Act in a Nutshell: Shelter Assets Like a Special Needs Trust.

The ABLE Act provides accounts that shelter assets from Supplemental Security Income (“SSI”) and Medicaid in a manner similar to special needs trust. 

Background

The Able Act, HR 5771, was passed on December 19, 2014, enacting the Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 (the “ABLE Act“). The ABLE Act authorizes the establishment of accounts, similar to 529 education plans for persons with disabilities. While 529 education plans provide for distributions relating to a student’s educational needs, distributions from an ABLE account are for the purpose of meeting an individuals disability expenses.

You can find the full text of the ABLE Act at Division B of the Tax Increase Prevention Act of 2014, PL 113–295. The Act has been codified at 26 U.S.C. 529A. The Department of the Treasury issued proposed rules in the Federal Register, Vol. 80, No. 119 on Monday, June 22, 2015. The rules amend or add sections to 26 C.F.R. Parts 1, 25, 26, and 301.

The Able Act in California.

In California, A.B. 449 was approved by the Governor on October 11, 2015. Enactment of A.B. 449 was contingent upon enactment of S.B. 324. Both bills were enacted on the same day. The law adds a section, 23711.4, to California’s Revenue and Taxation Code. Also sections are added to California’s Welfare and Institutions Code. Those sections are: 4877, 4878, 4880, 4882, and 4884. 

According to A.B. 449 California’s 529A Plan will be called the California ABLE Program Trust. {Welfare and Institutions Code, Sec. 4877.} The ABLE Act Board will not only supervise the California ABLE Program Trust, make rules and regulations, etc., but also act as Trustee. Subsequent posts will analyze the ABLE Act, compare it to special needs trusts, and provide recommendations for utilizing this new opportunity.