In December 2014 the Achieving Better Life Experience (“ABLE”) provision was signed into law providing a means for saving and paying for disability-related expenses. Recently the IRS issued proposed regulations which may be relied upon until (and if) final regulations are proposed. Highlights include:

* States may offer tax-favored accounts or contract with other states that offer them.

* Disabled individuals must have become disabled before age 26.

* The disabled individual is both the account owner and beneficiary.

* A maximum of one account is permitted.

* Contributions are capped at the annual gift tax exclusion (currently $14,000/yr).

* Distributions are free from income taxation if used to pay qualified disability expenses.

* Accounts will not be used to determine an individual’s eligibility for many federal means-tested programs.

It is important to note what does/doesn’t count as a qualified disability expense. In general it is something relating to a disabled individual’s quality of life – something that maintains or improves health and independence. Examples are housing, education, transportation, health/wellness/prevention, employment training/support, assistive technology and personal support.

Additional detail may be found by reviewing the proposed regulations.