On August 11, 2015 the Governor signed into law the North Carolina Achieving a Better Life Experience Act (North Carolina ABLE Act). While the legislation does not fully meet the lofty expectations the title implies, it does allow disabled North Carolina residents to save a small amount of money without jeopardizing the government benefits that are so critical to their health and well-being.
Over the course of the summer, as legislative chair for the Elder and Special Needs Law Section of the North Carolina Bar Association, I worked with several other attorneys across the country, as well as policy staff with the North Carolina State Treasurer’s Office, to complete drafting and advocate for passage of North Carolina ABLE Act Legislation.
The North Carolina ABLE Act has some limitations set by federal law but will generally allow people with disabilities to save some money beyond the $2,000 restriction placed on them by SSI, Medicaid or other North Carolina specific government benefits.
Here are the highlights of the NC ABLE Act:
- An account can be opened by the disabled person or someone acting on their behalf;
- The disabled person must be disabled according to Social Security guidelines and certified by the IRS as disabled prior to age 26;
- A disabled person can have only one ABLE account;
- The maximum total annual contributions to the account are equal to the annual gift tax exclusion ($14,000 for 2015);
- The total maximum amount the account balance is $100,000. Any amount in the account above $100,000 will count as a resource toward the disabled person’s asset restriction of $2,000;
- The NC Treasurer will be overseeing the investment of the funds and holding all accounts for residents of NC;
- The contributions are not tax deductible but the income earned is tax free;
- Distributions from the account can be made only for “qualified disability expenses.” These include education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services, and other expenses which will be further described in regulations to be developed in 2015 by the US Department of Treasury; and
- The NC Treasurer will offer investment options and the investments can be changed twice a year.
No More Need for a Special Needs Trust?
Originally the federal legislation did not limit annual contributions or the total balance of the account. With the account contribution and balance limitations, ABLE accounts do not supplant the need for a Special Needs Trust.
ABLE accounts will be helpful in instances where a family member wants to help a disabled individual save a little money or the disabled person receives a small amount from working, an inheritance, or a lawsuit. Normally $14,000 or less would not be worth the cost and effort to set up a Special Needs Trust. When the disabled person received a small amount of money in the past, they would be told to “spend-down” before the end of the month to keep from losing SSI or other benefits. Under the ABLE Act, the disabled adult can now fund $14,000 annually into an account.
This is not necessarily a windfall for the disabled, but is a rare win to allow those with disabilities to achieve a better life experience.
The law firm of McGuire Wood & Bissette and the Trust Estates and Elder Law Team is dedicated to improving the quality of life of the residents of Western North Carolina. As part of that dedication, we are active leaders in our community and advocates for these improvements.