• Qualifying for an ABLE Account
• Opening a Missouri ABLE Account
• Owning an ABLE Account
• ABLE Account Tax Questions
• ABLE Accounts and other Federal Programs
• Transferring or Ending an ABLE Account
Qualifying for an ABLE Account
- What is the ABLE Act?
Federally enacted in 2014, the Stephen Beck, Jr., Achieving a Better Life Experience (ABLE) Act amends the federal tax code to allow eligible individuals with disabilities to save money in a federally tax-exempt account while still allowing those individuals to be eligible for federal public benefits. The money in those accounts may be used for qualified disability expenses.
- What are ABLE accounts?
An ABLE account is a tax-advantaged savings account that certain individuals with disabilities can open. Money placed in an ABLE account grows tax-deferred and is tax-free if used for qualified disability expenses.
- What is the Missouri ABLE Program?
The Missouri ABLE Program is this State’s program to allow individuals with disabilities to take advantage of the ABLE Act’s tax benefits. The Missouri ABLE Program allows individuals with disabilities to open ABLE accounts that are exempt from both federal and state taxes, if the account funds are used for qualified disability expenses. The Missouri Achieving a Better Life Experience Board (“Board”) oversees the program.
- What is the Missouri ABLE Board?
The Missouri ABLE Board is a group of individuals with broad experience in State government, health and senior services, and management of public funds. The Missouri State Treasurer chairs the Board. The Board develops and implements the Missouri ABLE Program, ensuring that it is properly administered for its participants.
Opening a Missouri ABLE Account
- Who can open an ABLE account?
An ABLE account can be opened by (1) an eligible individual (called the “designated beneficiary”), (2) the parent or legal guardian of an eligible individual, or (3) a person who has power of attorney for the eligible individual.
- Are ABLE accounts available to anyone with a disability?
No. To have an ABLE account, the person’s disability or blindness must have occurred before the age of 26.
- Which disabilities qualify a person for an ABLE account?
Many types of disabilities will make a person eligible for an ABLE account. However, the disability must have begun its onset before the person was 26 and be either blindness or a medically-documented physical or mental impairment, which (1) causes marked and severe functional limitations and (2) can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. Also, a disability will qualify a person for an ABLE account if that disability (1) began its onset before the person was 26 and (2) entitles the person to Supplemental Security Income or Social Security Disability Insurance benefits.
Owning an ABLE account
- Am I eligible to participate in the Missouri ABLE Program?
There are two alternative ways to be eligible to open an ABLE account. First, the person must, due to a disability or blindness that occurred before the age of 26, be entitled to Supplemental Security Income or Social Security Disability Insurance benefits.
Second, the person must have medical documentation showing that, before the age of 26, the person was blind or had a severe and functionally-limiting disability.
- Can I open a Missouri ABLE Account if I am not a Missouri resident?
Yes. While the original federal ABLE law required individuals to open ABLE accounts in their home state, the US Congress amended ABLE in December 2015 and eliminated this state residency requirement. Therefore, an individual can open an ABLE account in any state that offers an ABLE Program. If you are not a Missouri taxpayer, you should determine whether your home state’s ABLE Program offers tax advantages that are only available for investments in such state’s ABLE Program.
- How can I open a Missouri ABLE account?
The Missouri ABLE Program expects to offer online enrollment as well as enrollment through paper filings. Please check this website for updates on the Missouri ABLE Program’s progress or sign up for email updates here.
- Can I open a Missouri ABLE Account now?
No. Please check this website for updates on the Missouri ABLE Program’s progress or sign up for email notifications to stay informed.
Also, please be wary of anyone offering ABLE program services to you now. Currently, only a few States’ ABLE programs are available.
- When can I open a Missouri ABLE account?
Please check this website or sign up for email notifications to stay informed on the Missouri ABLE Program’s progress.
ABLE Account Tax Questions
- Who owns the ABLE account?
The designated beneficiary is the account owner. However, the account owner, the parent or legal guardian, or the designated power of attorney can control the funds in the account, depending on who has been authorized.
- How much money can be contributed to an ABLE account?
Consistent with federal law, the maximum amount that can be contributed to a Missouri ABLE account is $14,000 per year. If a contribution is made to an ABLE account that has already received its $14,000 in contributions for that year, that contribution will be returned to the donor.
- Are there limits to how much money can be in a Missouri ABLE account?
The maximum amount that can be accumulated in a Missouri ABLE account is $325,000. However, in two limited circumstances, a high-value ABLE account can affect a person’s eligibility for certain federal benefits.
First, if you qualify for certain means-tested assistance (such as supplemental security income [SSI]), any amount above $100,000 will be considered as “personal assets” for purposes of qualifying for SSI. Once your ABLE account reaches $100,000, then your SSI benefits will be suspended until the ABLE account value is less than $100,000.
Second, if you take a distribution from your ABLE account for certain housing expenses, then that distribution will also be a resource for purposes of qualifying for SSI.
- How many ABLE accounts can a person own?
Unlike 529 college savings programs, individuals are limited to one ABLE account.
- Can anyone contribute to an ABLE account?
Yes, anyone can contribute to ABLE accounts: the eligible individual, family members, friends, or other donors. However, there is an annual cap on contributions to an ABLE account. The maximum amount that can be contributed to a Missouri ABLE account is $14,000 per year.
- Who controls the funds in an ABLE account?
As the account owner, the designated beneficiary controls the ABLE account. However, other people can be given authority to control the account, such as the designated beneficiary’s parent or legal guardian, or the designated power of attorney. People who donate to the ABLE account have no ability to control or direct the funds they donated.
- What can the funds in an ABLE account be used for?
Funds in an ABLE account can be used to pay for qualified disability expenses.
- What is a “qualified disability expense”?
A qualified disability expense is an expense made from an ABLE account that is used to pay for certain types of expenses related to the beneficiary’s disability, such as paying for:
- assistive technologies,
- personal support services,
- health care expenses,
- administrative services, and
- employment training and support.
- What happens if ABLE account funds are used to pay for something other than a qualified disability expense?
If money is taken from an ABLE account and not used to pay for a qualifying disability expense (making it a “nonqualified withdrawal”), then the earnings portion of that distribution loses its tax exemption and will be subject to a 10% penalty tax. This means that, to avoid being taxed on the distribution, you should withdraw from an ABLE account only as much money as needed to pay for the specific disability expense.
- Can a person with a disability work and still have an ABLE account?
Yes, and the after-tax income earned from that job may be contributed to the ABLE account. However, note that the yearly $14,000 contribution limit still applies to your own contributions as well.
ABLE Accounts and other Federal Programs
- Does an ABLE account beneficiary pay any taxes on the money held in an ABLE account?
No, the beneficiary does not pay taxes at either the federal or the Missouri level. Once deposited into an ABLE account, funds can grow, accumulate, and be used for qualifying expenses, all without federal or Missouri tax consequences. However, if money is taken from an ABLE account and not used to pay for a qualifying expense, then that distribution’s earning portion loses its tax exemption and will be subject to a 10% penalty tax.
- Are there any additional tax benefits from having a Missouri ABLE account?
Yes, but only for Missouri residents. Missouri residents who own a Missouri ABLE account earn a state income tax deduction: when reporting their adjusted gross income to the State, those residents may deduct contributions up to $8,000 per participant ($16,000 if married and filing jointly).
Transferring or Ending an ABLE Account
- Will I lose my Medicaid benefits if I have an ABLE account?
No, you will not lose your Medicaid benefits if you have an ABLE account, even if the account exceeds $100,000.
- Will I lose my SSI benefits if I have an ABLE account?
No. But, if your ABLE account exceeds $100,000, then your SSI benefits will be suspended until the account is below $100,000. Also, if you use your ABLE account to pay for certain housing expenses, then those distributions from the ABLE account used for those expenses will be considered a “personal asset” when determining your eligibility for SSI benefits.
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- Can an ABLE account be transferred to another account owner?
Yes, but only if (1) the new account owner would also be qualified to own an ABLE account, and (2) is a sibling (such as a brother, sister, stepbrother, stepsister, half-brother, or half-sister). If either of these two conditions are missing, then all distributions will be treated as nonqualified withdrawals and subject to the 10% penalty tax.
- I have a MOST account or other 529 higher education savings plan. Can I transfer money from that account to an ABLE account without tax consequences?
No. Under current federal law , transferring money from your 529 account into an ABLE account would not be a qualified higher education expense.
- What happens when an ABLE-account designated beneficiary passes away?
Federal law authorizes state Medicaid agencies to become a creditor and seek reimbursement for the Medicaid services a beneficiary has received since the beneficiary opened the ABLE account. All outstanding qualified disability expenses—for instance, burial costs—will be given priority over the Medicaid claims. The remainder of assets in an ABLE account will go to the beneficiary’s estate.