The New Jersey Achieving a Better Life Experience (ABLE) Act became law today.

Under the new Act, New Jersey’s Department of Human Services and the Department of the Treasury are required to establish the ABLE Program pursuant to federal law. Under the program, persons who became disabled before age 26 and are found to meet the disability requirements for Social Security disability benefits may establish an ABLE account, and become the beneficiary of that account. ABLE accounts are designed to enable people with disabilities and their families to save and pay for disability-related expenses.

ABLE accounts are exempt from state income taxation. Also, an ABLE account will not be counted when determining the beneficiary’s eligibility for public benefit programs based upon financial need, or in determining the amount of any benefit provided under those programs.

Contributions can be made to an ABLE account on an annual basis in a total amount up to the annual gift tax exclusion amount, currently $14,000. Distributions from an ABLE account are tax-free if used to pay “qualified disability expenses.”

“Qualified disability expenses” are expenses that relate to the beneficiary’s blindness or disability and help that person maintain or improve health, independence and quality of life. For example, qualified disability expenses can include housing, education, transportation, health, prevention and wellness, employment training and support, assistive technology and personal support services and other expenses.

An ABLE account holding up to $100,000 is not counted in determining the beneficiary’s eligibility for needs-based public benefit programs. Public benefit providers consider an ABLE account to be a countable resource to the extent that the ABLE account balance exceeds $100,000. When the beneficiary dies, any funds remaining in an ABLE account must be used to repay the public benefit providers for all amounts the public benefit providers spent on the beneficiary.

An ABLE account is a useful tool to assist people with disabilities. However, ABLE accounts have significant limitations which prevent ABLE accounts from replacing special needs trusts.  Due to the limit on annual contributions ($14,000) and the total account balance limit ($100,000), Special needs trusts are needed for large inheritances and large lawsuit awards. Also, although ABLE accounts must repay public benefit providers for public benefits received by the account beneficiary, third-party special needs trusts have no obligation to repay.

The New Jersey ABLE Act will take effect in October 2016.

The new ABLE Act enacted in New Jersey on January 11, 2016 is annexed here – Senate Bill No. 2770

For additional information concerning special needs trusts & disability planning, visit: