It is vitally important for individuals of all walks of life to develop independence, self-sufficiency and a sense of self-worth. In other words, success breeds success! In order to promote greater financial independence for low income individuals with disabilities, our lawmakers have recently taken steps to enable residents of our state who are low income and disabled under the Social Security Administration guidelines to deposit money into a special account that will not disqualify them from receiving Supplemental Security Income (SSI) and Medicaid. The recently enacted legislation called The Achieving a Better Life Experience Act (ABLE Act) was signed into law by President Obama in December 2014 and adopted by the Illinois legislature in July 2015.
The Illinois ABLE Act takes advantage of a federal amendment to the Internal Revenue Code, allowing eligible individuals with disabilities and their families to establish a tax-exempt savings account that will allow for the use of the funds, entirely tax-free, for specific expenses related to one’s disability. These allowed expenses include: education, transportation, housing, obtaining and/or maintaining employment, and personal support services.
The implementation of the ABLE Act is a welcome step forward to empower people with disabilities since eligibility for several public benefits programs—such as SSI, SNAP benefits (food stamps) and Medicaid—require recipients to have no more than $2,000 in their name at the end of each month. For many individuals with disabilities and their families, these guidelines contradict the intent of such programs because they effectively require people to remain destitute. In essence, the ABLE Act enables low income individuals to improve their overall quality of life.
Our office receives calls from personal injury attorneys that obtain very modest settlements or judgements for their clients as a result of an injury. Often, the personal injury attorney is worried about paying out the funds to a client and jeopardizing the client’s eligibility for certain benefits when the injured client is low income and receiving SSI and Medicaid benefits. In the past, these people who receive small settlements would need to “spend down” the funds on exempt assets, such as an automobile of reasonable value, pay off debts, or purchase household goods, like a television, furniture, and clothing, so that the injured client has $2,000, or less, in accordance with the individual resource limit. In essence, one’s failure to "spend down" the settlement proceeds by the end of the month in which they receive the funds, would ultimately result in the loss of those welfare benefits until such time as they can demonstrate that the remaining funds have been spent down on the above-stated expenses.
With the new ABLE Act accounts, qualifying individuals can now save up to $14,000 annually. Moreover, the first $100,000 deposited in an ABLE account is considered an exempt asset under SSI guidelines. However, if an individual’s ABLE account exceeds $100,000 that person would then lose their SSI benefits, but preserve their Medicaid benefits.
Furthermore, the money in these accounts will not be taxed as it grows, or as it is used for the specified purposes, and will not be considered an asset under the Medicaid guidelines. The ABLE Act does limit eligibility to individuals with significant disabilities that were developed, and documented as having been developed, before the age of 26 (note though that this does not mean a person must be 26 or younger to apply for an ABLE Act account). If a person meets the age criteria and is already receiving SSI benefits, they are automatically eligible.
The ABLE Act accounts program in Illinois is still in its infant stages of implementation by the Illinois Treasurer’s Office. To learn more about how the ABLE Act and other legal instruments may assist you or a loved one with preserving certain government benefits, please contact attorney Michael Roth at Lavelle Law, Ltd. at (847) 705-7555 or email@example.com.