Achieving Financial Freedom & Economic Viability for Persons with Disability
As of March 2018, Arizonians with disabilities can now use the Achieving Better Life Experiences Act (ABLE) legislation to open tax-free investment accounts as a new pathway towards their independence and self-sufficiency. To tell us all about it, Brittany Chipley, Executive Director for the Department of Economic Security AZ- ABLE Plan, spoke to a group of parents at the August LDI Speaker Series about this promising program.
AZ ABLE accounts are modeled after 529 College Savings Accounts and allow investment assets to accumulate without affecting eligibility for federal or Arizona means-tested programs, such as Medicaid and SSI.
Some of the benefits of AZ ABLE are obvious, such as providing 4 Vanguard Mutual Funds, which generate both federal and state tax-free earnings, no separate tax returns to file, and putting the power of investment choice/asset allocation for expenses in the hands of the person who has the disability.
This freedom of choice empowers that individual to make their own decisions for what is best for them, as opposed to working with an agency or parent. It is owned by the person with the disability and increases the savings capacity from $2,000 to $15,000 (tied to the Gift Tax maximums), without incurring the risk of losing health care or other benefits.
Individuals with disabilities that are employed, have an additional $12,060 they can save each year for a total annual cap of $27,060 and lifetime cap of roughly $500,000 invested. Dividend and interest income from these investments are not part of the lifetime cap or are taxed.
Ms. Chipley demonstrated the ease in setting up an account (takes less than 20 minutes) and walked the audience through the eligibility process. You must be an Arizona resident, onset of the condition occurred before the age of 26 and meet one of three criteria: eligible to receive SSI or SSDI due to disability, have one of the conditions listed on SSA’s List of Compassionate Allowance Conditions or self-certification.
There are some nuances that seem conflicting, such as disability onset must occur before the age of 26 (Outside of the costs to government- why that age?), and qualifying conditions are restricted to those listed on the SSA website https://www.ssa.gov/disability/professionals/bluebook/listing-impairments.htm, which do not seem to include high incidence conditions such as learning disabilities.
Self-certification is the second route a person can take to establish eligibility, which uses functional limitations standards to measure severe impacts to a person’s overall ability to manage key areas of life.
This is a potentially difficult standard to meet, as there are some conditions which may require cost-prohibitive physician recertification on an annual basis. There is no information on how a person who were diagnosed by school psychologists as having special education eligibility, recognition and services during their school years would be able to meet this standard.
Once eligibility is approved and the account is set up, there are many unrestricted uses of these funds such as housing and rent, basic living expenses, education, transportation, assistive technology and medical/legal bills.
The account holder is issued a STABLE card, which is a loadable debit card. The card is free and there are no limits on withdrawal amounts. AZ ABLE does not question the use of funds, but state or federal benefits agencies may want documentation. As long as a person sets up online banking tools which can provide spending records if asked, the beneficiary is in good shape. There are numerous safeguards built in to protect these accounts, such as limiting of merchants, no cash access and no overdraft concerns.
There is one major limitation to these accounts to mention right up front. Any money left in an ABLE Act account at the death of the beneficiary will be payable to the state Medicaid agency. For someone receiving benefits from the Arizona Health Care Cost Containment System, that means AHCCCS will get most or all of the balance in an ABLE Act account.
While not for everyone, and as no substitution for a well-planned and executed special needs trust, AZ ABLE accounts significantly move the ability of more people with disabilities to improve their economic viability and prospects, without the risk of losing work or benefit-related income.
For more information, please contact Brittany Chipley here: https://az-able.com/