The ABLE Act Has Some Drawbacks

I have previously discussed the ABLE Act, which allows for the creation of a trust to help pay for the expenses of a person with a disability without disqualifying that person from receiving government benefits.  As of now there are eleven states that have enacted the ABLE Act and another six states with pending legislation.  In order to benefit from the law a person would need to live in a state that has enacted the ABLE Act.

One problem with the ABLE Act is a Medicaid recovery procedure called a “clawback.”  If a person with a disability who received Medicaid benefits dies with money still left in their ABLE account Medicaid will be able to make a claim to that account through its clawback option.  Some families might prefer setting up a traditional special needs trust as an alternative to using an ABLE account.  The ABLE Act is still a good idea for people with disabilities who want to save for themselves without risking the loss of government benefits.

See Liz Weston, The Limitations Of ABLE Accounts For The Disabled, Reuters, May 18, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.