Able Accounts in Texas – A Game-Changer for the Individual with Disabilities
It is hard to appreciate the solution if you do not first understand the problem. And, folks, the ABLE act addresses a big problem.
It starts with the idea that it is expensive to be disabled, so most individuals with disabilities have to get public benefits just to pay for the basics. The most well-known government programs are SSI, SNAP and Medicaid. Each of these programs, however, require that the individual be poor to start out with, and remain poor to continue to qualify. How poor? Think $2,000.00 in total assets.
A measly $2,000 is not enough money to buy all of the necessities that aren’t covered by the government programs. So in 2014 a new law was passed that allowed for individuals and their families to put money into special savings accounts, called ABLE accounts, that would not disqualify the individuals from government benefits. ABLE accounts can be used to pay for a host of expenses, like education, housing, transportation, employment training, and health care expenses.
As great as this is, there are some drawbacks. The annual contribution into the account is maxed at $14,000 per year. The total amount that the account can have at any one time is $100,000 (for individuals receiving SSI). The individual has to have a qualifying disability that occurred before turning 26 years of age. Only one account is allowed per person.
And then there is the biggest negative: payback. In almost every case, the money remaining in the ABLE account when the individual dies will get paid to the State. The State gets to use the funds to reimburse itself for Medicaid monies that it paid out.
Compare that to what happens to money remaining in a trust account that is set up and funded by someone else (not the disabled person). These trusts are called third-party settled special needs trusts. If that seems like a lot of nouns randomly stuck together, then break it down. Third-party” means that it was set up by someone other than the person with disabilities (who is called first-party). “Settled” means the third-party actually put money or assets into the trust. “Special Needs Trust” has specific language that limits how the funds can be spent, so the individual is not disqualified from receiving government benefits.
Unlike an ABLE account, any money left in a third-party settled special needs trust can be distributed to other beneficiaries, and does not go to the state. So if mom sets up a special needs trust for her son with disabilities, then when the son dies the remaining trust funds can go to his siblings or anyone else chosen by mom.
Now for Texas. When the Federal government approved the ABLE accounts, it left it up to each state to iron out the specifics. Texas promptly set up a committee, which has until 2019 to think about it. So Texas does not yet have an ABLE program.
However, Texas residents are free to enroll in any other state’s programs that accepts out of state residents. So far, Kentucky and Florida are the only states that are off-limits.
Individuals and families will want to look at both an ABLE account and a third-party special needs trust. So far, those are the best opportunities to provide financial help to an individual with a disability.