PK Law previously reported on the advent of ABLE (“Achieving a Better Life Experience”) accounts (the “Accounts”). By enacting a change to the Internal Revenue Code (“IRC”), new Sec. 529A, Congress permitted distributions from the Accounts, created under that Section of the Code, to be made tax free when made, essentially, for the wellness of special needs children. The Accounts are to be administered under individual state auspices.
While not a replacement for a Special Needs Trust and estate planning for a family with a special needs child, the Accounts provide some real benefits to parents of special needs children including accumulations tax free so long as they are used for “qualified disability expenses” and exemption from the $2,000 limit on personal assets in qualifying for Supplemental Security Income and other public benefits. Restrictions include a limit on the balance of such Accounts; limitation on eligibility by way of a required diagnosis of disability of the Account’s beneficiary prior to age 26; and a potential capture of an Account’s assets at the beneficiary’s death.
The “Protecting Americans from Tax Hikes” (PATH) Act of 2015 (the “Act”), was recently passed and signed into law by the President. The Act removed the requirement that an Account could only be opened in the beneficiary’s home state. As with IRC §529 plans, beneficiaries may now have an Account opened in any state. However, the Act did not include a change that would permit the rollover of a §529 account to a §529A account.
Many states have begun the implementation of the Accounts. In Maryland, bills have been introduced in both the House of Delegates and the Senate to implement an ABLE program in the form of House Bill 431 and, as cross-filed in the Senate, Senate Bill 355. Hearings are to be held on the bills later in February.
The House legislation states that the “goal” of the legislature is that Maryland’s program be “operational” by October 1, 2017 and be overseen by a board established by the legislation, working in consultation with the Maryland Department of Disabilities and in permitted collaboration with other entities. The proposed legislation requires the ability to make “automatic contributions” into an Account. It also prohibits assets in an Account from being considered for purposes of “means-tested” programs and prohibits the attachment or seizure of “any current or future benefit” under an Account. HB 431 does, however, permit “any state” to file a claim for “medical assistance paid for the designated beneficiary under the state’s Medicaid plan after the establishment of an ABLE account” as generally described in IRC §529A (F). The proposed legislation also reflects certain limitations described in §529A and deals with certain tax matters germane to Maryland income tax.
PK Law Wealth Preservation attorneys have assisted a significant number of Maryland families find the resources needed to care for their special needs loved ones. To contact a PK Law Wealth Preservation Attorney click here or contact firstname.lastname@example.org.
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