Alaska is now accepting applications for its ABLE program, known as the Alaska ABLE Plan. Details regarding Alaska’s ABLE program are provided below.
ABLE accounts are bank accounts that enable persons with special needs to save money while still receiving disability payments. The federal ABLE (Achieving a Better Life Experience) Act inspired ABLE accounts, however they are formed and administered at the state level.
ABLE accounts are not yet available in all jurisdictions, and each state will have somewhat different laws and processes for creating and utilizing an ABLE account.
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Save Money Without Being Punished
People with special needs must demonstrate that they do not have enough money to maintain themselves independently when applying for disability payments. Any money in a typical bank account counts against a person’s eligibility for disability payments.
As a consequence, persons with special needs are unable to save money that they earn or acquire via inheritance or gifts. On a daily level, this implies that persons with special needs must live on very little money in order to get government assistance.
One solution to this problem is to employ special needs trusts, which give a location to preserve money for the benefit of the person with special needs (without affecting his or her eligibility for benefits). Special needs trusts, on the other hand, must be governed by a trustee, not the individual with special needs who benefits from the trust. This not only gives a special needs person minimal control over his or her resources, but it also inhibits the individual’s independence.
ABLE accounts cover this need by allowing persons with special needs to manage a small bank account without jeopardizing their eligibility for SSI, Medicaid, or other government assistance.
Federal ABLE Account Regulations
The federal ABLE Act establishes the fundamental guidelines for all ABLE accounts. (The federal act may be found at https://www.congress.gov/bill/113th-congress/house-bill/647/.) When states approve and execute the ABLE Act, they must follow federal guidelines while also adding their own. The following are the federal regulations:
Qualifications due to disability To create an ABLE account, you must declare under pain of perjury that you have a crippling “condition that started before to the age of 26” and that you meet the Social Security Administration’s definition of “disabled” for children. (CFR §416.906.)
There is just one account. Each individual may only have one ABLE account.
Anyone may deposit funds into the account. Anyone, even the owner with a handicap, may contribute to an ABLE account.
Contributions are restricted to a maximum of $14,000 per year (in 2017). Because this limit is equivalent to the yearly personal gift tax deduction, it will be raised every few years. To clarify, this is per account, not per donation. The account’s owner must maintain track of all donations to ensure they do not exceed $14,000 in a calendar year.
Many people limit their accounts at $100,000. The amount of an ABLE account cannot exceed $100,000 for persons who qualify for SSI. For individuals who do not qualify for SSI, the account may grow to the state’s 529 plan cap. The cap in Alaska is $400,000.
The funds may only be used for Qualified Disability Expenses (QDE). QDE are costs that are “connected to the account holder’s eyesight or impairment.” Fortunately, this is a rather wide term that might cover accommodation, schooling, transportation, job training, health and wellbeing, financial management, legal bills, and other expenditures.
If utilized appropriately, account money are not taxed. Income generated from ABLE account money is not taxed. Contributions are paid after-tax money, and QDE dividends are tax-free.
Medicaid is paid using unused monies. If the account owner dies with assets in an ABLE account, the funds must be utilized to pay all outstanding QDE bills, including funeral expenditures, to reimburse Medicaid for any Medicaid benefits received, and then to be dispersed to the account holder’s lawful dependents.
Alaska ABLE Accounts
The following are some specifics concerning Alaska’s ABLE account.
Alaska ABLE Plan is the common name for the Alaska ABLE Plan.
Savewithable’s website is https://savewithable.com/ak/home.html.
Alaska Statutes 06.65.150 through 06.65.280 (SB 104)
Alaska Savings Program for Eligible Individuals is the name of the legislation (Alaska ABLE Saving Program Act)
Ascensus is the program manager.
BlackRock, Schwab, and Vanguard are investment managers.
Account maximum: $400,000 ($100,000 to maintain SSI eligibility).
Out-of-state residents are welcome: Yes
The minimum deposit to start an account is $50.
Is a debit card available?
Optional investments: Six risk-adjusted investing alternatives
Account fees: $40 per year for account maintenance ($15 additional for paper delivery).
Annual account balance fees range from 0.34% to 0.38%, depending on the investment type you choose.