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At long last, California’s ABLE program is now available to disabled California residents!  Here is a link to establish the account:

A little background: President Obama signed into law the Stephen Beck Jr. Achieving a Better Life Experience Act (ABLE) Act in 2014.  This Act provides that a disabled individual can have one savings account that can receive up to the “annual exclusion” amount (currently $15,000) each year, and that does not interfere with needs-based public benefits such as Supplemental Security Income (SSI) or Medi-Cal.  The account is modeled after the 529 plan in that after-tax money is put into the account, earnings grow tax-deferred, and withdrawals, when used for Qualified Disability Expenses, are federal and state tax-free.  It is available to people who became disabled before age 26. 

Q: What are the fees for a CalABLE account?

A: CalABLE imposes a $37 yearly account maintenance fee, and there is a state administrative fee of 0.44% of the assets held in the account.  There are 4 investment options (ranging from conservative to more aggressive), and an investment fee (ranging from 0% to 0.10%).  An initial deposit of $25 is required to open the account.  Here is a link to a fact sheet prepared by the California treasurer on CalABLE:

Q: I’ve already set up an ABLE account for my child in another state.  Can/should we switch to a CalABLE account?

A: We recommend that you look at the terms of each ABLE program and see which are most beneficial to you and your family.  Here is an online website that compares the various programs around the country:  

Q: Will Medi-Cal place a lien on an ABLE account after the owner’s death?

A: No, the ABLE program was originally designed so that Medicaid could bring a reimbursement claim, but states are allowed to opt out of this, and California has opted out!  So Medi-Cal should not bring any reimbursement claims against ABLE accounts.

Q: Is there any way to contribute more than $15,000/year to the account?

A: If the ABLE account holder is working, he or she can contribute up to $12,140 of earnings to the ABLE account, in addition to the $15,000 annual contribution amount, for a potential total of $27,140. 

Q: Tell me one really cool thing about using the ABLE account as a planning tool?

A: As you may know, payments for food or housing to a disabled beneficiary receiving SSI from a third party (e.g. the beneficiary’s parents or a special needs trust) can reduce the SSI amount by about $250/month.  However, an ABLE account is considered the beneficiary’s own money, so distributions for food or housing from an ABLE account should not reduce monthly SSI payments!  One planning strategy, therefore, is to establish an ABLE account for a disabled beneficiary, and have the third party transfer assets to the ABLE account each month; the beneficiary would then pay for rent and food out of the ABLE account.  I think this is a great workaround to preserve SSI benefits!

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