In December 2014, Congress approved the ABLE (Achieving a Better Live Experience) Act, allowing qualifying individuals with disabilities to open a tax-free savings account. The goal of this act is to provide financial independence and empowerment for the disability community. Each state was eligible to create its own criteria. The first ABLE programs were launched in 2016 in Ohio, Tennessee, and Nebraska. Georgia launched its ABLE program, called STABLE, in 2017.
The STABLE account is designed to provide individuals with a safe harbor to protect their resources. It is especially beneficial for people who receive social security or use Medicaid since one of the criteria to maintain this eligibility is to have no more than $2000 in resources.
“How do you live in this world with less than $2,000 in resources? How would you save for that trip to Disney World? You couldn’t. Unless you had a STABLE account,” explains Anna Maki, Director of Benefits Navigation at the Bobby Dodd Institute (BDI).
Georgia STABLE Accounts allow individuals with disabilities to save and invest up to $17,000 annually (more for working individuals) without affecting eligibility for other benefits programs.
“A STABLE account allows you to create a safe harbor for your savings. They act very much like a savings account, but all the assets in the STABLE account are not viewed as countable resources for Medicaid eligibility purposes. STABLE accounts are very similar to first-party or third-party special needs trusts. The only safe places where individuals can safeguard these resources are Special Needs Trusts or a STABLE account,” adds Anna.
Who Should Open an ABLE Account and What are the Eligibility Criteria?
An ABLE account is an excellent option for anyone with a disability who has or is looking to have Medicaid as a resource. It is a tax-free* alternative to a traditional savings account and a good addition to a supplemental trust. It is considered an investment account, similar to a 401k, for example. Opening a STABLE account will protect your benefits while protecting any excess funds you may receive including an inheritance or settlement. You can even safely deposit your Social Security Disability Insurance into your STABLE account. Supplemental Security Income cannot be direct deposited into an ABLE account.
Based on the current eligibility requirements, be eligible for a STABLE account, the person who applies must:
- Be blind or have a medically determinable physical or mental impairment that results in marked and severe functional limitations, and such condition developed before the age of 26 and will last, or has lasted, at least a year.
- Be a U.S. citizen or legal resident and be a Georgia resident.
- Confirm one of the following:
- You are eligible for SSI or Social Security Disability Insurance (SSDI) based on a disability.You have a condition listed on the Social Security Administration’s “List of Compassionate Allowances Conditions.”You experience blindness as determined by the Social Security Act.
- You have received, and can provide if requested, a signed diagnosis of the qualifying disability from a licensed physician.
“If you’ve gone through the process with Social Security, where they have determined that your disabling condition is severe enough to warrant this determination of disability, that is pretty much all the documentation you would need. Some people will be eligible without having SSI or SSDI, but a Letter of medical verification will be required in this case,” explains Anna Maki.
What are the Steps to Open a STABLE account?
To open a STABLE account, you need your date of birth, address, and SSN or Taxpayer Identification Number. You must also know your diagnosis so you can properly select from the provided options. To apply online, you must visit the Georgia Stable website and follow the prompts given by the system. You can also fill out the Enrollment form and mail it to STABLE Account Plan, PO Box 534425 Pittsburgh, PA 15253-4425.
STABLE offers you the opportunity to choose from multiple investment options for the funds you deposit into the account. These investment options are like special needs trusts. The Growth option allocates 80% of your investment to corporate stocks and 20% to bonds. This option carries the highest risk but is also associated with higher expected returns. Moderate Growth divides the amount with 60% in favor of stocks and 40% in bonds. The Conservative Growth Option maintains a 40% investment in corporate stocks and a 60% investment in bonds. The Income Option allocates 20% to stocks and 80% to bonds. Arguably, the safest and most conservative option is to allocate 100% of your funds into an account insured by the Federal Deposit Insurance Corporation (FDIC). Your selection will determine any future asset-based expenses, ranging anywhere between 0.19% and 0.33%.
What are the Fees Associated with Opening a STABLE Account?
There is no fee to open a STABLE account, but you will need to make an initial deposit of $25. There is no charge for withdrawing money. Georgia residents pay $3.25 per month to maintain a STABLE account. If you opt for a STABLE True Link Visa® Card, there is a $5.00 monthly fee.
What Are the Eligible Expenses?
Qualifying expenses include any expense related to improving the quality of life for the individual that is not covered by their benefits. These expenses encompass living expenses, education, housing, transportation, employment training and support, assistive technology, personal support services, health prevention and wellness, financial management, administrative services, legal fees, and oversight and monitoring. Make sure you keep track of all your expenses, as the IRS may request those documents.
If, for any reason, you spend money on items not considered qualified expenses, be prepared to pay taxes on investment growth, plus a 10% penalty on earnings for non-qualified items. This may also have a negative impact on your Supplemental Security Income (SSI) benefits or Medicaid, as any non-qualified withdrawals are considered income for the month.
STABLE Account or Trust?
The answer is to have both. A STABLE account does not replace a Supplemental Needs Trust, also known as a Special Needs Trust or a Pooled Trust. There are key differences that are meant to provide people living with disabilities and their families with more options. If you are setting up a supplemental needs trust, you usually need some money to do so, as there are administrative fees involved, including a one-time set-up fee of $900 with the Georgia Community Trust at BDI. There are also administrative fees to manage the trust once the trust is activated.
“What if you just want to save a little bit of money as you go along? That’s where an ABLE account comes in because you can put a small amount of money in there, and it won’t cost you nearly as much as a Trust,” says Anna Maki.
Some of the other benefits associated with opening a STABLE account include the fact that the beneficiary owns the funds and can access them for qualified expenses. The earnings are tax-free. There is a yearly limit of $17,000 and a lifetime maximum of $517,000. Funds can be used for food and housing without affecting benefits.
The STABLE account does not eliminate the need to set up a Trust. Moreover, an ABLE account can serve as a pass-through account in relation to a supplemental needs trust. Since a supplemental needs trust is designed for supplementary needs, it is not intended for expenses like rent, food, and other basics, and there are limitations on how that money can be spent.
An ABLE account could be an instrumental part of your long-term estate planning needs. It is also economically worthwhile.
If you have more questions, you can contact the Bobby Dodd Institute Benefits Navigation experts for assistance.
Disclaimer: This post is intended for informational purposes only. Its goal is not to provide specific recommendations on how to invest your funds. For assistance with selecting your investment options, please contact a licensed professional.