Will ABLE Accounts Help Disabled Individuals in Illinois?
For someone like Patty Vasquez, whose son, Declan, has been suffering since birth due to the fact that the fibers that connect the right and left sides of his brain are missing, the news that Illinois lawmakers have authorized the use of Achieving a Better Life Experience (ABLE) accounts gives her and her family hope.
Patty and Declan’s story was featured in a Chicago Tribune article concerning the ABLE Act back in August. Patty was told when Declan was born that there was a chance he would never be able to walk or have an intellectual capacity beyond that of a 2-year-old. At the age of 3, Declan began walking, and while he still cannot speak, he started pointing at age 8 and learned how to give kisses at age 9. Still, Patty and her family worry about Declan’s future.
How ABLE Accounts Help Disabled Individuals in Illinois
Last July, Illinois lawmakers greenlit legislation that will enable the disabled in the state to take advantage of ABLE accounts. ABLE accounts are similar to 529 college saving plans, because they allow relatives and friends to fund savings accounts for disabled individuals up to $100,000 tax-free. In addition, the account holders can withdraw the funds they need to pay for qualified disability expenses tax-free and without losing their eligibility for Social Security Disability Insurance (SSDI), Medicaid and other federal benefits.
A few of the ways ABLE accounts help disabled individuals in Illinois include:
- Funds in ABLE accounts are allowed to earn interest tax-deferred.
- ABLE accounts remain tax-free as long as the funds in the accounts are only used to pay for approved disability expenses.
- In many cases, to remain eligible for public benefits, such as SSI and Medicaid, people with disabilities are only allowed to maintain $2,000 or less in assets. Therefore, an ABLE account is a legal means for disabled individuals to increase their asset limitation to $100,000 without risking their eligibility for federal benefits.
- Funds in ABLE accounts can be used for qualifying disability expenses tax-free, which is anything disabled individuals pay for because of their disability, such as speech therapy, renovations to make their home more accessible for persons with their disability, updates to vehicles to make them more accessible, assistance with financial management and estate administration, medical expenses, employment training and personal equipment, such as wheelchairs, to help with their disability.
- account holders do not need approval prior to spending money from their ABLE account. However, they are required to have documentation available, if requested, to prove that they only used the money on qualified expenses.
- Beneficiaries can retrieve money from their ABLE accounts through multiple means, including direct payments from the ABLE account to service providers, debit cards or direct deposit from the ABLE account to the disabled individual’s bank account.
- Following a December 2015 amendment to the federal ABLE Act, disabled individuals are no longer limited to opening an ABLE account in their state of residence, because the state of residency requirement was eliminated.
The Des Plaines and Hoffman Estates attorneys at Pluymert, MacDonald, Hargrove & Lee, Ltd are dedicated to helping families in the greater Chicagoland area with estate planning, probate law and trust administration.