In December, 2014, Congress passed the ABLE Act, which allowed those with disabilities that qualify to save money in a special type of savings account which is exempt from the means-testing required for Medicaid or Supplemental Security Income benefits. So funds can be saved for disability-related expenses, not be part of the means-testing requirements, and also accumulate in a tax-advantaged environment. After Congress passed the act, it was up to each state to then enact it on a state-by-state basis.
Nevada passed SB 419 a couple of years ago, thereby authorizing Nevada’s Treasurer to implement the ABLE program. However, it took the State a while to actually implement the program. But now, Nevada’s ABLE Program is up and running.
Nevada has a website that explains the program here. In general, if you are eligible for SSI or SSDI due to your disability and the disability existed prior to the age of 26, you can open an ABLE account. Opening the account is easy through the website. Once opened, you can save up to $100,000 in the account without it being counted against your SSI resource limitation.
The account funds accumulate tax free for qualified expenses. The qualified expenses for which the account may be used include education, health needs, transportation, housing, employment training, legal fees, personal support services, as well as several other items. If the account assets are not used for qualified expenses, part of the withdrawal will be subject to income tax and a 10% federal tax penalty.
The investment options range from an aggressive asset allocation down to a very conservative allocation. So there should be an investment strategy that meets your risk tolerance and situation.
The ABLE Nevada program can be good alternative to a special needs trust in the right situation. If you are receiving an inheritance or personal injury settlement, and the ABLE account is not sufficient, a SNT might be the answer. Click here to learn more about SNTs.