STABLE Account

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21 Aug, 2024

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A STABLE or ABLE account is a specialized savings and investment account designed for individuals with disabilities. The "STABLE" comes from "The Achieving a Better Life Experience Act." It aims to help individuals with disabilities and their families save money for disability-related expenses.

It allows them to accumulate funds for various needs, including education, housing, transportation, healthcare, and other qualified disability-related expenses. The importance of STABLE accounts lies in the financial security and independence they offer to individuals with disabilities, empowering them to plan for their future and achieve a higher quality of life without the fear of losing critical benefits.

What Is A STABLE Account?

STABLE accounts allow individuals with disabilities to save and invest money without jeopardizing their eligibility for means-tested government benefits, such as Medicaid and Supplemental Security Income.
Contributions to a STABLE account grow tax-free, and withdrawals for qualified disability expenses are also tax-free. This provides potential tax savings and allows the funds to grow more effectively over time.
STABLE account owners can make investment decisions and use the funds for various disability-related expenses, empowering them to shape their financial future.
STABLE accounts often offer user-friendly online platforms for easy access and management.

STABLE Account Explained

A STABLE account is a specialized savings and investment account that enables individuals with disabilities to save money for disability-related expenses while preserving eligibility for crucial government assistance programs. These accounts were created in the United States in 2014 to allow people with disabilities to save and invest money without jeopardizing their eligibility for certain government benefits, such as Medicaid and Supplemental Security Income (SSI).

These expenses can include education, housing, transportation, healthcare, assistive technology, personal support services, and more. Individuals can plan for future expenses and achieve greater financial security by saving in a STABLE account.

One key feature of a STABLE account is that the funds can grow tax-free. Contributions made to the account are not tax-deductible, but the earnings and withdrawals used for qualified disability expenses are tax-free. This allows individuals to save and invest without incurring additional tax burdens. Another important aspect of a STABLE account is that it allows individuals to maintain eligibility for means-tested government benefits.

Eligibility

Let us look at some common eligibility criteria:

Disability onset before age 26: The individual must have developed a significant disability or blindness before age 26. This requirement ensures that the account is intended for individuals who have experienced a disability from a young age.
Meeting disability criteria: The individual must meet the definition of disability as outlined in the Social Security Act, which includes physical or mental impairments that result in marked and severe functional limitations.
Receiving benefits or filing a disability certification: The individual must either be receiving benefits under the Supplemental Security Income (SSI) program or the Social Security Disability Insurance (SSDI) program, or they can submit a disability certification signed by a licensed physician.
Residency requirement: The individual typically needs to be a state resident that offers the STABLE account program. However, some states may allow non-residents to open an account.

How To Enroll?

Let us look at how to enroll in a STABLE account. One can follow these general steps:

Research and select a STABLE account program: Begin by researching and choosing a suitable STABLE account program available in your state. Explore the options provided by your state's STABLE program or contact the program administrator for enrollment information.
Confirm eligibility: Ensure that the eligibility criteria for opening a STABLE account are met. Verify the specific requirements outlined by the chosen STABLE account program, such as the age of disability onset and the necessary documentation for proving the disability. If eligible, gather the necessary documents, including proof of identity (e.g., valid ID, passport) and disability-related documentation, such as a physician's letter or benefit verification.
Complete the enrollment application: Fill out the enrollment application provided by the STABLE account program. Provide accurate personal information, contact details, and any other requested information mentioned in the application.
Submit supporting documentation: Attach any required supporting documents to the enrollment application. These may include disability verification, eligibility proof, or any other documents specified by the STABLE account program.
Select investment options: Review the available investment choices within the STABLE account program. Evaluate the different options considering factors such as risk levels and potential returns. Choose the investment strategy that aligns with financial goals and risk tolerance.
Fund & manage the account: Determine the initial contribution amount for the STABLE account. Make the initial deposit through methods provided by the STABLE account program. Access and manage the account once the enrollment is complete and the STABLE account is funded. Regularly contribute to the account, monitor investments, and make qualified withdrawals for disability-related expenses.

Examples

Let us look at the examples to understand the concept better.

Example #1

As per the article by The New York Times, STABLE accounts can be accessed beyond the previous age criteria. The crux of the article highlights the eligibility criteria as of 2026 for ABLE (Achieving a Better Life Experience) accounts, also known as STABLE accounts.

The article states that the ABLE Age Adjustment Act, included in the recent omnibus spending bill, has expanded the eligibility criteria for ABLE accounts. Previously, only individuals who became disabled before age 26 could open these accounts. However, with the new legislation, the onset of a qualifying disability can now occur up to the age of 46. This change allows more individuals, including military veterans and others, to qualify for ABLE accounts starting in 2026.

For example, people whose disabilities were caused by car accidents or the development of neurological diseases like multiple sclerosis later in life can now be eligible. The adjustment aims to provide greater access to the benefits of ABLE accounts. Thus, allowing a broader range of disabled individuals to benefit from the tax-advantaged savings and investment opportunities these accounts offer.

Example #2

Consider Emily, who is a young woman with Down syndrome. Emily has been working part-time and receiving SSI benefits to help cover her living expenses. She has dreams of attending college and pursuing a career in graphic design. However, she's concerned that saving money for her education might jeopardize her eligibility for SSI and other important government benefits.

Fortunately, Emily's family set up a STABLE account for her when she turned 18. They've regularly contributed to the account, and the funds have been growing. Emily's STABLE account balance has reached a substantial amount. It allows her to confidently pursue her dreams without worrying about losing her benefits.

Emily uses the funds from her STABLE account to pay for college tuition, books, and art supplies. She also uses some of the money to attend conferences and workshops related to graphic design. Since the withdrawals from her STABLE account for qualified disability expenses are tax-free, Emily doesn't have to worry about incurring additional tax liabilities.

With the financial security provided, Emily completes her degree and enters the job market as a skilled graphic designer. She's able to secure a job and live independently. She continues to save and invest in her STABLE account for future disability-related expenses.

Benefits

Let us look at some key benefits:

Asset development without impacting government benefits: One of the primary advantages is that it allows individuals to save and invest money without jeopardizing eligibility for means-tested government benefits.
Tax advantages: Contributions made to a STABLE account are not tax-deductible, but the earnings and withdrawals used for qualified disability expenses are tax-free. This can lead to significant tax savings over time, allowing the funds in the account to grow and be utilized more effectively.
Ability to receive contributions from various sources: Friends, family members, and even the account owner themselves can contribute to a STABLE account, providing an opportunity for others to support the financial well-being and future needs of the account holder.
Account portability: In many cases, a STABLE account can be maintained even if the account holder moves to a different state. This means that individuals can continue to manage and utilize their STABLE account regardless of their residential location.

STABLE Account vs Special Needs Trust

Let us look at the key differences between a STABLE account and a Special Needs Trust:

Parameters	STABLE Account	Special Needs Trust
Purpose	A savings and investment account designed to help individuals with disabilities accumulate funds for disability-related expenses while maintaining eligibility for means-tested government benefits.	A legal arrangement that holds and manages assets on behalf of an individual with disabilities, to enhance their quality of life while preserving eligibility for government benefits.
Control	The account owner or their authorized representative maintains control over the funds and investment decisions within certain limits set by the program.	A trustee is appointed to manage the trust and make decisions regarding the disbursement of funds and investments.
Eligibility	Must meet specific criteria related to the age of disability onset, disability severity, and receipt of certain government benefits.	Generally, there are no specific eligibility criteria, but the trust is typically established for individuals with disabilities who are eligible for government benefits.
Funding	Contributions can be made by the account owner, family members, and friends up to the annual contribution limit set by the program.	Typically funded by a third party, such as family members, through gifts, inheritances, or donations.
Qualified Expenses	Funds can be used for various qualified disability-related expenses, such as education, housing, transportation, healthcare, and assistive technology.	Expenses must be for the sole benefit of the individual with disabilities and can cover a broader range of needs, including medical care, personal care attendants, housing, and recreational activities.

Frequently Asked Questions (FAQs)

1. Are there contribution limits for STABLE accounts?

Yes, STABLE accounts have annual contribution limits, which vary by state. These limits are generally quite high, often exceeding $15,000 per year. However, there may also be lifetime contribution limits, which can range from $100,000 to over $500,000, depending on the state.

2. What happens to the funds in a STABLE account if I pass away?

In the event of the account owner's death, the treatment of the funds in a STABLE account varies by state. Some states may have provisions for Medicaid payback, meaning that Medicaid may seek reimbursement for the medical expenses paid on the account owner's behalf. However, some states have implemented Medicaid exemption, where funds can pass to designated beneficiaries without being subject to Medicaid recovery.

3. Can I transfer funds from a Special Needs Trust to a STABLE account?

Yes, in many cases, funds from a Special Needs Trust can be transferred to a STABLE account. However, consulting with a financial professional or attorney is important to ensure compliance with legal and tax regulations.