The Achieving a Better Life Experience Act (“ABLE Act”) now allows certain disabled individuals to save and invest money without jeopardizing their eligibility for needs based public benefit programs such as Medicaid and Supplemental Security Income (“SSI”). Disabled people and their family members and friends now can contribute up to $14,000 per year without putting at risk federal means tested benefits.
The maximum account balance limit for a Michigan ABLE account is $500,000. However, if the account balance exceeds $100,000, the account beneficiary will no longer be eligible for SSI although he or she will retain eligibility for Medicaid. Before the ABLE Act, single recipients of Medicaid and SSI were limited to owning countable assets of not more than $2,000.
A MiABLE account is exempt from creditors with the exception of the State of Michigan. On the death of the account beneficiary, the state may seek reimbursement for Medicaid expenses paid on his or her behalf.
ABLE became federal law on December 19, 2014. It amended section 529 of the Internal Revenue Code to allow disabled individuals to save funds to pay for certain expenses. ABLE accounts are similar to section 529 accounts which allow individuals to contribute to tax advantaged accounts to pay for certain educational expenses.
On October 28, 2015 Michigan’s ABLE Act (“MiABLE”) became law in Michigan. MiABLE allows ABLE savings account to be established for disabled Michigan residents and certain disabled non residents. Distributions must be used for education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management, legal fees, and other specified expenses.
Contributions to a MiAble account are deductible up to $5,000 on a Michigan single filed income tax return and up to $10,000 on a jointly filed return. Distributions from a MiABLE account (including earnings) are not subject to income tax if used for qualified disability expenses. If used for non qualified expenses, the distribution amount could be subject to income tax and a 10% penalty. Moreover, distributions for non qualified expenses could also effect other state and federal benefits. Therefore, a MiABLE account owner should be careful to ensure that withdrawals are properly spent and keep careful records.
An eligible individual can only have one MiABLE account, but anyone can contribute to the account. In order to be eligible, the account beneficiary must:
1. Have become blind or disabled before age 26, and
2. Either –
a. Be currently entitled to Social Security Disability Insurance (“SSDI”) or SSI, or
b. Obtain a disability certification under US Treasury rules.