03 Dec How can we save my mom’s money from Medicaid?

Q. My mother is trying to qualify for Medicaid. She has mental disorders dating back to childhood. She has lived a good full life thanks to her deceased but caring husband. Her elder care attorney is telling her to spend her remaining $14,000 to qualify for Medicaid, but can’t the money be protected under the ABLE Act?
— Trying to help

A. Yours is a great question.

The Stephen Beck Jr. Achieving a Better Life Experience Act of 2014, better known as the ABLE Act, was signed into law on Dec. 19, 2014.

It allows qualified individuals with disabilities to have tax-free savings accounts in which they can save up to $100,000 without jeopardizing their eligibility for Supplemental Security Income (SSI) and other means-tested government programs such as Medicaid, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.

She said the funds in the accounts can be used to pay for education, health care, transportation, housing and certain other expenses.

To be eligible, individuals must have a qualifying disability that occurred before age 26.

Each individual may establish only one ABLE account, Whitenack said, and annual contributions are capped at the federal annual gift tax exclusion, which is $15,000 in 2020.

“Funds remaining in the account when the account beneficiary dies must first be used to repay Medicaid for expenses it incurred on behalf of the beneficiary,” she said.

Individuals who are entitled to SSI or Social Security Disability Insurance (SSDI) based on blindness or disability are automatically eligible to establish an ABLE account, she said.

Individuals who do not receive those benefits can have an ABLE account by self-certifying that they have a qualifying disability and a diagnosis of disability signed by a qualified physician, although the signed physician diagnosis does not have to be submitted at the time that the account is opened, she said.

“The reader’s mother can deposit the $14,000 in an ABLE account and still qualify for Medicaid if she can establish that she had a qualified disability prior to age 26 and that she still has that disability,” she said.

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This story was originally published on Dec. 3, 2020.

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