In this article, we will explain Illinois ABLE Accounts.
The Federal Achieving a Better Life Experience (“ABLE”) Act allows for tax advantaged bank accounts known as ABLE Accounts that can be used by individuals with disabilities to save money without decreasing the amount of their government benefits such as Supplemental Security Income (“SSI”). Although the ABLE Act is a federal law, each state in which ABLE Accounts are available has its own rules for how ABLE Accounts in its jurisdiction work.
Many individuals with disabilities receive means tested government benefits. This means that the benefits only continue as long as and to the extent that the disabled individual’s assets or income are below a certain threshold.
Illinois ABLE Accounts and Supplemental Needs Trusts are two tools that we can use to allow individuals with disabilities to earn income and save money without reducing their government benefits. For more information on how ABLE Accounts and Supplemental Needs Trusts work together in planning for special needs, check out our article: Illinois ABLE Accounts and Special Needs Trusts.
Beneficiaries of an ABLE Account must be legally disabled and must have been disabled prior to age 26.
If ABLE account funds are used for “Qualified Disability Expenses” the funds receive tax advantaged treatment and do not negatively impact government benefits. Qualified Disability Expenses include a wide range of expenses related to the owner’s disability or blindness including education, housing, transportation, employment training and support, assistive technology, and personal support services.
ABLE account contributions are made with post-tax dollars. However income frome earned from the funds in the account is not taxed, and distributions for “Qualified Disability Expenses” are not taxed.
The maximum annual contribution to an Illinois ABLE Account is the same as the Federal gift tax exemption. In 2018 this amount is $15,000.00
The maximum account balance for an ABLE Account in Illinois is $350,000.00. However, if your ABLE Account balance exceeds $100,000.00, any amounts over and above $100,000.00 will impact your means test for Supplemental Security Income (SSI).
When the owner of an Illinois ABLE Account dies, any remaining funds in the ABLE Account are applied in order to the following:
Illinois ABLE Accounts are a new tool that can be implemented in your special needs planning. However, you should work with a professional in order to determine whether an ABLE Account, a Supplemental Needs Trust, or a combination of both will be the best fit for your individual goals, as well as how income and assets should be allocated between the two vehicles.