IRS rethinks rules for savings accounts to care for young people with disabilities

IRS rethinks rules for savings accounts to care for young people with disabilities
States get additional guidance on how to administer 529 ABLE plans.
JUN 29, 2016
The tax-advantaged savings accounts that Congress approved late last year to cover costs of caring for young individuals with disabilities are a step closer to being available. The Internal Revenue Service on Friday issued changes to the proposed rules for how states can offer and operate these 529 Achieving a Better Life Experience (ABLE) accounts. Congress approved legislation last December that allowed states to offer these accounts for people who became disabled before the age of 26. But it was up to the IRS to approve the details of how these accounts, similar to 529 college savings plans, will work. NO SOCIAL SECURITY NUMBERS The latest guidelines said states mostly would not have to collect taxpayer Social Security numbers from those who contribute to such an account. It also said those who apply for an account won't have to submit physician documentation showing a disability diagnosis, the IRS wrote in a notice Friday. “These are important issues for an administrator,” said Andrea Feirstein, president of AKF Consulting. Two states, Nebraska and Ohio, have begun soliciting possible service providers even though the IRS rules haven't been finalized. More than 40 states have initiated or approved legislation to facilitate the accounts, Ms. Feirstein said. FIRST OR SECOND QUARTER It will likely be the first or second quarter of 2016 before any state is making the accounts available, she said. Under the law, individuals can contribute up to $14,000 — the current annual gift exclusion amount — in a given taxable year into an ABLE account. Account holders could take distributions, provided they are for the beneficiary's disability expenses, and those amounts would not be include in gross income for tax purposes. One of the biggest benefits of the ABLE account is that the money held there is exempt from the $2,000 limit on personal assets for individuals who wish to qualify for public benefits. Generally, a disabled person with more than that amount is ineligible for Medicaid and Supplemental Security Income benefits.

Latest News

Judge OKs more than $90 million in settlement money for GWG investors
Judge OKs more than $90 million in settlement money for GWG investors

Mayer Brown, GWG's law firm, agreed to pay $30 million to resolve conflict of interest claims.

Fintech bytes: Orion and eMoney add new planning, investment tools for RIAs
Fintech bytes: Orion and eMoney add new planning, investment tools for RIAs

Orion adds new model portfolios and SMAs under expanded JPMorgan tie-up, while eMoney boosts its planning software capabilities.

Retirement uncertainty cuts across generations: Transamerica
Retirement uncertainty cuts across generations: Transamerica

National survey of workers exposes widespread retirement planning challenges for Gen Z, Millennials, Gen X, and Boomers.

Does a merger or acquisition make sense for your firm? Why now is the perfect time to secure your firm’s future
Does a merger or acquisition make sense for your firm? Why now is the perfect time to secure your firm’s future

While the choice for advisors to "die at their desks" might been wise once upon a time, higher acquisition multiples and innovations in deal structures have created more immediate M&A opportunities.

Raymond James continues recruitment run with UBS, Morgan Stanley teams
Raymond James continues recruitment run with UBS, Morgan Stanley teams

A father-son pair has joined the firm's independent arm in Utah, while a quartet of planning advisors strengthen its employee channel in Louisiana.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave