Tax-Free Savings Accounts for the Disabled in Illinois

July 29, 2015

Under provisions of a bill passed by the state legislature at the end of May, people in Illinois may soon be able to take advantage of a new savings vehicle that will help them cover certain expenses of disabled children. Taxpayers can now set aside tax-free savings accounts for the care of qualified disabled persons. Called ABLE (Achieving a Better Life Experience) accounts, individuals and families can establish these accounts to set aside as much as $14,000 a year and up to a total of $100,000 to be used for the education, housing, assistive technology, and other needs of disabled persons.

The accounts are similar to 529 college saving accounts and are for individuals who became disabled prior to age 26.The money in an ABLE account does not count as an asset. Under current law, disabled individuals can lose certain Social Security benefits and Medicaid coverage if they have more than $2,000 in assets. Account holders can take distributions, provided they are for the beneficiary’s qualified disability expenses.

Federal legislation allowing states to establish these kinds of accounts was passed in December of last year. Senator Robert Casey, Jr. (D-PA), one of the co-sponsors of the federal legislation, stated, “(Individuals) with disabilities face incredible challenges every day. They shouldn’t be penalized simply for trying to save for their future. Congress should use current programs to ensure America’s most vulnerable have the same opportunities that are provided to all citizens.” Peter V. Berns, CEO of The Arc, one of the largest national organizations advocating for people with intellectual and developmental disabilities, characterized the Act this way: “The ABLE Act is about giving people with intellectual and developmental disabilities the opportunity to achieve their dreams. Families are looking for ways to finance things like an apartment, or a ride to work, or additional educational opportunities after high school that don’t jeopardize other necessary services provided by federal programs. This bill creates a tool for families that could lead to a more independent and fulfilling life.”

The government authorized the creation of ABLE accounts, but because an account may only be opened in the state in which the beneficiary resides, individual states have to come up with their own plans for administering ABLE accounts. At last report, 20 states have enacted ABLE laws and five other states plus Illinois have passed ABLE bills. Thirteen state senators and 30 state representatives co-sponsored the Illinois legislation (SB1383) which now awaits Governor Rauner’s signature.

We at Nash Disability Law supported the ABLE account legislation. If you or someone you care about is eligible for an ABLE account, we encourage you to look into this opportunity to see if it could be financially helpful for your individual circumstances.