ABLE Act / Social Security Update
As you read last week, we attended the annual Stetson SNT conference and listened to the 2015 update from Ken Brown and
Eric Skidmore from the Social Security Administration. The
implementation of the ABLE Act was a big topic for discussion.
For those
not familiar, ABLE, Achieving a Better Life Experience, is basically a
section 529 Educational Savings account with a few twists. First, only
individuals who were disabled prior to age 26 can use them and the funds can be
used for things other than education. Examples of allowable expenditures
are: education, housing, transportation, employment training, assistive
technology, health, prevention and wellness, financial management, legal fees,
expenses for oversight and monitoring of the ABLE account, and funeral and burial arrangements.
ABLE accounts seem a lot like a Special Needs Trust, which
is true, but there are a few exceptions. We could write entire articles on the
similarities and differences of SNT’s and ABLE accounts, and probably
will. I wanted to focus on one particular nugget that came out of the
recent conversation with Social Security.
Generally speaking, if an SNT pays for food or shelter for a
beneficiary receiving SSI (Supplemental Security Income) there will be a reduction in
the individual’s SSI check. It was unclear whether a payment for shelter
expenses out of an ABLE account would result in an SSI reduction for the ABLE
account owner. A payment for food has not been an issue since food is not
a permissible expenditure from an ABLE account. It was thought, at least
by me, that shelter payments would result in an SSI reduction.
Social Security has hinted that they do not intend to
consider shelter payments from an ABLE account as in-kind support and therefore
not impact SSI. As Donald Trump might say, this is HUGE! This could
be the ideal way to supplement an SSI recipient’s shelter expenses.
Parents, or others, can place funds into the ABLE account (with no impact on
SSI resulting from the funding) then the ABLE funds could pay for shelter with
NO REDUCTION IN SSI benefits. Then just repeat the process every month or
as needed. It could be an endless (at least up to several hundred
thousand dollars worth) flow through of help. Previously there was no way
to make such payments without the 1/3 reduction (or in some instances where the
SSI recipient only received a few hundred dollars per month, a complete loss of SSI).
Prior to this discussion with Social Security, I couldn’t envision using ABLE accounts
very often, if at all. The benefits of the ABLE account (tax-free growth,
potentially low costs) were (and I still believe are) outweighed by the
disadvantages (must be under age 26 when disability occurred to use, $100,000
limit for SSI recipients, mandatory Medicaid payback on death, annual
contribution limits and lifetime limit on contributions). However the
ability to pay for housing from ABLE with no SSI reduction can make the ABLE account a
necessity for every SSI recipient who became disabled prior to age 26.
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