On April 24, 2017, Missouri launched MO ABLE, the state’s Achieving a Better Life Experience disability savings program. Missourians with disabilities may now open an ABLE account to save and invest, tax-free, without jeopardizing federal needs-based benefits such as SSI and Medicaid. For more information about the ABLE Act, which Congress passed in December 2014, and about ABLE accounts in general, please see our prior e-alert.
Missouri has partnered with the Ohio STABLE Account program to offer the investment accounts at discounted rates. The program will be administered by the Missouri State Treasurer’s Office. Individuals interested in opening a MO ABLE account should visit www.moable.com. The website offers clear information about the program, an eligibility quiz and an easy, user-friendly platform to open an account with as little as $50.
The benefits of the program are significant for individuals living with disabilities. Like 529 college savings plans, earnings on a MO ABLE account are not subject to federal or state income taxes, so long as the funds are used for qualified disability expenses. In Missouri, donations to a MO ABLE account by family and friends are tax-deductible up to $8,000 for individuals and $16,000 for married couples filing jointly.
Not only do the accounts have tax-savings features, but they will not trigger a loss of public benefits. Medicaid eligibility will not be affected, regardless of the amount held in a MO ABLE account. SSI benefits may be affected if the amount held in the account exceeds $100,000. However, if this occurs, while SSI benefits will be suspended, the individual will not be terminated from the SSI program.
While MO ABLE accounts are a definite step forward for Missourians with disabilities, they do have some limitations and risks. Unlike college savings plans, only one account per individual may be opened, eligibility requirements must be met, and contributions (from all sources) are limited to $14,000 annually and $325,000 over the individual’s lifetime. Families also must be cautious about inadvertently using the funds for non-qualified expenses that could trigger a loss of benefits and result in income taxes and penalties. Significantly, upon the individual’s death, funds remaining in the account may only be passed to a sibling with a disability or the individual’s estate, which will subject the account to probate and claims, including the state of Missouri seeking reimbursement (payback) for benefits paid beginning with the date the account was opened through the individual’s death.
For these reasons, families should consider MO ABLE accounts as a complement to, rather than a replacement of, special needs trusts. A customized special needs trust still offers the most flexibility and security when planning for a beneficiary with disabilities.