ABLE Accounts in Kentucky: A Disability Savings Plan

Kentucky and Ohio have joined together to give ABLE accounts to persons with impairments.

Kentucky is presently accepting applications for its ABLE program, known as STABLE Kentucky. Details regarding Kentucky’s ABLE program may be found here.

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. Kentucky was one of the first states to make its ABLE plan available for enrollment.

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. Money saved in a regular bank account is taken into consideration when determining 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 utilize a special needs trust, which gives 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 maximum in Kentucky is $350,000.
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.

Kentucky ABLE Accounts

The following are some specifics concerning Kentucky’s ABLE account.

STABLE Kentucky is a common name. ABLE Program
Kentucky Legislation: http://stablekentucky.com/ 2016 SB179
Name of legislation: n/a
KRS 205.200 is the legal authority.
Kentucky State Treasurer is the program’s administrator (as a partner of the Ohio ABLE Savings Program)
Intuition ABLE Solutions LLC is the program manager.
Marquette Associates, Inc. is an investment adviser.
Vanguard is an investment management.
Account maximum: $350,000 ($100,000 to maintain SSI eligibility).
Out-of-state residents are welcome: Yes
The minimum deposit to start an account is $50.
Yes, a debit card is available.
Investment possibilities: There are five investment alternatives, each with a different risk level.
Monthly account fees are $5.
Annual account balance fees range between 0.19% and 0.34%, depending on the investment type chosen.
Documentation for the Plan: http://stablekentucky.com/files/Documents/STABLE-disclosure-digital-12.7.16.pdf However, keep in mind that this is the plan disclosure document for Ohio, as given by STABLE Kentucky.