Wisconsin Finally Has ABLE Accounts! (Almost)
If you’ve ever dove into the complicated world of disability-related acronyms, you may have heard of “ABLE accounts.” In this case, “ABLE” stands for Achieving a Better Life Experience (Act). It was a law passed in late 2014 to permit certain qualifying individuals with disabilities to save money without losing their means-tested benefits like Medicaid or Supplemental Security Income (SSI).
What did this mean in non-lawyer terms? Lots of people who have a disability determination from the Social Security Administration (SSA) qualify for SSI benefits. This is a monthly income benefit you can receive if you are deemed “totally and permanently disabled” by Social Security, and if you qualify financially. The current maximum SSI benefit for 2024 is $943 for a single individual, plus the $83.78 that Wisconsin chips in. In Wisconsin, the even more valuable benefit of qualifying for SSI is that it comes with Medicaid eligibility. That means health insurance, long-term care supports, and more. In other words, important stuff.
To qualify financially for SSI, a single person must have less than $2,000 in countable assets. Certain assets like a house or car may be exempt, but generally speaking, any sort of money in an account is countable. That means having $5,000 or even $3,000 in assets can cause a loss of SSI benefits, and along with it, a loss of Medicaid benefits. Scary stuff.
These draconian asset limits for people with disabilities have resulted in some very strange advice. If a person with a disability and on SSI earns a little bit of money and wants to save it for a rainy day, they are instead told to spend all the money as soon as possible. If a relative wants to leave even a little bit of money to a disabled individual at death, they are often instead advised to disinherit that person. Or, again, the disabled person is told to get their inheritance and blow it right away. The result is that disabled individuals, who know that being disabled is very expensive, are kept in a never-ending loop of poverty. If they try to do what makes good financial sense, they are punished. Unfair stuff.
Then, in late 2014, ABLE accounts rolled into town (i.e. were signed into federal law). These accounts are a type of 529 account. Many people are familiar with 529 education savings accounts. ABLE accounts are 529A accounts, for disability expenses. The current rules say that if an individual is disabled prior to age 26, they may have one ABLE account set up either by themselves or by another individual with authority. The account is an online savings account owned by the disabled individual. Up to $18,000 of contributions can be made per year (more if the owner is working and not contributing to a retirement account). The value of the account is exempt for SSI purposes, up to $100,000. Funds from the account can be used for “qualified disability expenses,” which is defined incredibly broadly.
Now, it’s important to note that ABLE accounts are not the only way to save money, especially if the goal is leaving an inheritance to a disabled individual. Sometimes, special needs trusts are the better tool. When it comes to inheritances, usually a special needs trust is still going to be the desired vehicle for a few reasons. One, if an inheritance exceeds $18,000, the ABLE account doesn’t work. Two, if the account reaches more than $100,000 total, the excess is countable for SSI purposes. Three, sometimes it’s good to have the professional management that a special needs trust trustee can provide. Four, the funds leftover in an ABLE account can be eaten up by Medicaid’s estate recovery program after the owner dies. With a special needs trust, there is no contribution limit. There is no limit on the value of the account. A professional trustee can manage the assets. And, for third party special needs trusts, no Medicaid estate recovery.
The point is, ABLE accounts are another tool in our special needs planning toolbelt, and it’s good to have lots of tools. ABLE accounts can be great if Joe has a part time job at a restaurant and wants to save his income each month while he lives at home with mom and dad. Maybe he wants to save up for when he moves out on his own. Maybe he wants to save for a vacation. Maybe he wants to put money aside for dental care because he has a really decent dentist who doesn’t accept Medicaid (pretty common situation). Maybe Joe is perfectly capable of handling his own money because his disability is physical not cognitive, and he’s a bit annoyed that if he puts money in a special needs trust, he’s required to give up control of his own money. Or, maybe Joe has some intellectual impairments, and his parents want him to be able to practice managing smaller amounts of money with relatively low risk involved. Joe could have an ABLE account for these things, and a special needs trust for his eventual inheritance. Depending on Joe’s particular situation, there’s a lot of good uses for ABLE accounts.
As of the end of 2023, 46 states had some sort of ABLE legislation. Wisconsin was not one of them. Without going into the deep history of why, the basic overview is that Wisconsin was actually one of the first states to pass ABLE legislation in 2015. Then, the powers that be essentially said, “Nah, that’s a lot of work and money. We won’t create our own program. Wisconsinites can find some other state’s program and just tag along with them.”
While technically that last part is true, it’s caused some problems. One is that without our own program, there’s no Wisconsin ABLE website, or special place dedicated to advertising ABLE accounts in Wisconsin. Therefore, many people don’t know ABLE accounts exist, or they don’t know you can simply create an account in another state and still have it be exempt in Wisconsin. These might be some of the reasons that Wisconsinites are creating far fewer ABLE accounts than disabled people in other states. The other issue is that state laws can sometimes conflict with one another. For example, Minnesota’s ABLE account program allows a guardian to set up and fund an ABLE account, but not manage it. That means a guardian can put money into the account but then not get it back out when it’s needed, even with an official Wisconsin court order. Not exactly something a Wisconsinite might know when they set up that account in Minnesota.
With all this background, disability advocates (like us elder law and special needs planning attorneys!) have been working for years to get an ABLE program in Wisconsin. Politics being what it is, it’s been a weird journey. Everyone seemed to like the idea, but it just wasn’t happening. To get ABLE accounts, you need a new law. To get a new law, you need legislators agreeing to vote on it. To get legislators to agree… you get the idea. However, as of very recently, we’ve actually seen some progress.
On April 4, 2024, Governor Evers signed Senate Bill 668 into law. That law looks like it has nothing to do with ABLE accounts. However, there was a little amendment at the back of that legislation that says the Wisconsin Department of Financial Institutions, “shall implement and administer an ABLE program, either directly or by entering into a formal or informal agreement with another state, or with an entity representing an alliance of states, to establish and ABLE program.” And it passed!
What does this mean for Wisconsinites today? As of today, nothing yet. The statute provides two options: (1) set up our own ABLE program, or (2) formally partner up with another state. We then have 7 months to figure out which way we’re going. Once a decision is made, it’s unclear how long implementation will take. The other complicating factor is, as always, money. There are some setup costs associated with an ABLE program, before anyone can start opening accounts. Apparently, it is unclear where that money is coming from, even though we have a law that says it’s supposed to happen. Is that a frustrating thing? Absolutely. Is it an unusual thing? Not really.
Therefore, for now, Wisconsinites looking to set up an ABLE account can still do so, just not yet in Wisconsin’s own program. So, if the urge to set up an account is not based on a current need, it might make sense to wait a bit and see what Wisconsin does. If it is a more immediate need, there are lots of states with quality programs, some of which have been operating for almost 10 years now. There is a wonderful little online tool that you can use to compare the ABLE programs of different states, and you can find that here: https://www.ablenrc.org/compare-states/. That website also has a wealth of other information about how ABLE works.
Does opening an ABLE account require attorney assistance? No, it does not. However, remember my Minnesota example above. Issues like that are a lot easier to avoid in the first place than fix later on. Also, if you aren’t sure what the rules are for your particular benefits, or what benefits you are receiving, or you’re confused about the pros and cons of funding an ABLE versus creating a special needs trust versus spending that extra money on a car or a television, it might be a great investment to spend a portion of that money getting quality legal advice from an attorney who specializes in elder law and special needs planning. We actually like thinking about this stuff.
