Setting Policy and Educating Californians about the ABLE Act

Stephen W. Dale Esq. LL.M

Trustee – Golden State Pooled Trust


The ABLE Act was passed in December of 2014, and Ohio was the first state to open their ABLE program in 2016.[1] As of this writing, there are 4 programs opened in Ohio, Nebraska, Tennessee and Florida. The Ohio, Nebraska, and Tennessee programs are open to anyone in any state, while the Florida program is exclusively for Floridians. While it is expected that many more states will enact their own programs in the coming years, ABLE Act programs are available now. And even in states like my home state of California, where our program is expected to go online sometime this summer, there is no reason to wait to educate our communities. This is partially true because so far the existing programs will allow a transfer of an ABLE Act account to another state’s program with little or no problem.

Typically, the Interest in a New Program Has Limited Shelf Life

If history is a guide, the window of opportunity to use the ABLE Act is a platform has a limited period of time that the community will pay attention. For example, the PASS Plan, or a Plan for Achieving Self-Support (PASS) was passed in 1996 allows a person with a disability to set aside otherwise countable income and/or resources for a specific period of time in order to achieve a work goal. When the PASS Plan was first introduced there was a great deal of attention to this new tool, but within 5 years the attention in this tool waned. This does not reflect that PASS Plans lacks importance, just that there are many issues that affect persons with disabilities and their families and focuses change in time. ABLE Act Accounts are here to stay, and likely to remain an important tool, but if history is an indicator, the level of interest that persons with disabilities and families have today with this new tool will not be as focused 5 years from now as it is today. This gives the disability rights advocate and the special needs trust community a limited time to take full advantage of this platform to reach out to the communities they serve.

The ABLE Act is a new tool with many uses and a great deal of education is going to be needed. The fact is, to make some educated decision persons with disabilities and their families need to understand all the different options, their strengths, and their challenges.

Opportunities in Your Community to Use The ABLE Act as a Platform to Build Meaningful Coalitions

Much of this paper is going to be focused on the activities of the Golden State Pooled Trust plans to be involved with to work with other disability organizations, stakeholders and the California State Treasurers office that is in charge of California’s ABLE Program. In many ways, the real value of the ABLE Act is not the ABLE Act itself – it is the platform to discuss the real issue – the need for sustainable funding from all sources –

    • Government funding
    • Funding from family and friends
    • Self-funding
      We often look at disability through our own prism

      prism which shapes our view of the community that we serve and the actions that we take. For instance, persons with loved ones with developmental disabilities will often have a different experience and focus that persons with loved ones with a mental illness. Persons with Down Syndrome typically have a different experience that those with Autism. Even within a specific disability group such as Autism, the experience of a family with a child with autism who is nonverbal and requires 24-hour supervision is often very different than a child with Asperger’s Syndrome. The point is that the education and the advocacy approaches that needs to be applied to this new tool will vary greatly from group to group and individual to individual, and will need to be adjusted accordingly. Much of the education that persons with disabilities and their families need to have is on why funding from all sources are so essential. Much of this comes from the movement from institutions to the community and a promise made by the federal and state legislation to shut down institutions such as state hospitals in favor of community programs. The promise made at the federal level as early as 1963 by President Kennedy was to move the funding from state hospitals sustainably to community programs. Sadly, over time the funds were not redirected at the level promised and many community programs are poorly funded or nonexistent. It is essential that persons with disabilities, their families and advocates educate themselves and their communities about not just which tools to use, but the need to support disability programs to increase the support necessary to provide basic services the enable persons with disabilities in the community to enjoy basic rights that the nondisabled community take for granted. I believe that assisting with implementation of the ABLE Act and educating communities about the need to promote sustainable assistance from all sources is a great platform to build lasting coalitions and influence policy to assist in achieving the goal of advocates who favored community living to achieve their objectives.Despite the initial objective of those that introduced the ABLE Act to eliminate or at least severely reduce the need for special needs trusts, the final legislation as it is today actually enhances the special needs trust as the cornerstone for planning. Special needs trusts will remain an important tool – in fact in many cases the ideal situation is to tie the 2 tools together. It is a mistake if one is presenting education to their community or to professionals that serve persons with disabilities to have as a primary objective to favor special needs trusts over ABLE Act accounts or vice versa. We need to be completely honest and precise about what we present – and not just select the facts that serve our objectives or please our funders. When the ABLE Act was being lobbied for passage, there are many examples from key organizations that promoted ABLE Act that omit important information such as the existence of the Medicaid lien. For instance, the National Disability Institute did a webinar on 10 things that one should know about the ABLE Act[2], and the fact that there is a lien did not make that list. Later the ABLE National Resource Center did a 90-minute webinar on things that advocates should know about the ABLE Act[3], and once again there was no mention of the lien. While the fact that there is a lien upon the death of the ABLE beneficiary, is an important factor but it is not the defining part of this legislation. Even so, for persons with disabilities and their families to make an educated decision, this is certainly something that they must factor in to their plan.One unique feature of the ABLE Act is that in the event the qualified beneficiary dies with remaining assets in an ABLE account:[4] The amount of any such Medicaid payback is calculated based on amounts paid by Medicaid after the creation of the ABLE Account

    • How this will be implemented at the state level and enforced is yet to be seen, but as an example the California Department of Health Services Medi-Cal Recovery Branch has taken the position that the following programs are subject to a Medicaid Lien for medical assistance in self-settled trusts;
    • The assets in the ABLE Account are first distributed to any State Medicaid plan that provided medical assistance to the designated beneficiary
    • The ABLE Act and the Medicaid Lien
    • Education in the Community Needs to be Fair and Balanced
    • Wont ABLE Act Accounts Eliminate the Need for Special Needs Trusts?
    • Education Should Focus on Why Setting Aside Funds for Persons with Disabilities is so Essential.
    • The real opportunity for the disability advocate is to build meaningful coalitions with all stakeholders. One of the strengths of the disability community which also leads to problems is the fact that the disability community is broad and diverse not only from disability group to disability group but also from person to person. Something that I have observed is that we often look at disability through our own
    • Residential care including group homes
    • Attendant care under In-Home Support Services even if provided by the parents
    • Transportation services even if not for medical appointments
    • Incontinence supplies
    • Day programs
    • Pre-vocational services
    • Medicare Part B premium payments
    • Basically ever dollar under the state plan is subject to the lienWith education persons with disabilities and their families that intend to use ABLE Act accounts should include a determination of the likelihood that the account could ever be subject to a lien and strategies to minimize it. To be able to understand the ABLE Act in the Medicaid lien as well as strategies to minimize the likelihood that the lien would be imposed in a specific case, it is important to understand the Medicaid lien in general.
    • The most common Medicaid lien is the Medicaid Estate Recovery Lien which generally imposes a lien for any Medicaid used by a benefits recipient after the age of 55. So for instance, if the benefits recipient or his or her spouse were to use Medicaid after the age of 55, a house that is in the benefit recipients name would likely be subject to the Medicaid Estate Recovery Lien upon the death of the Medicaid recipient or the death of the Medicaid recipients spouse.
    • The Pennsylvania ABLE Act program which is still in development is reportedly attempting to impose no lien or a reduced lien for Pennsylvanians. Other states are exploring not collecting the lien for their citizens using their ABLE Act programs.
Medicaid Recovery ABLE Account 3rd Party SNT Self-Settled SNT Self-Settled Pooled SNT
Medicaid used for medical purposes after age 55 The amount of any such Medicaid payback is calculated based on amounts paid by Medicaid after the creation of the ABLE Account No lien


Medicaid used for medical purposes from birth Medicaid used for medical purposes from birth not retained by the trust

An ABLE Act account is subject to a lien for an amount of any based on amounts paid by Medicaid for medical purposes after the creation of the ABLE Account for medical purposes. As previously mentioned – this can vary greatly on what is considered medical purposes from state to state.

The Medicaid lien for the special needs trusts depends on what kind of trust is being utilized. For instance, a Third-Party Special Needs Trust is not subject to a lien at all because the benefits recipient never on the assets of that trust. A self-settled special needs trust is subject to a lien for any Medicaid used during the entire benefit recipient’s lifetime, while a self-settled pooled trust is subject to a lien for any Medicaid used during the beneficiary’s lifetime of any remaining assets in their account that are not retained by the trust. The term “not retained by the trust” varies from state to state, but effectively whether assets in a self-settled special needs trust or a self-settled pooled trust can be left to the remainder beneficiary of the beneficiary’s choosing, the lien must be satisfied first.

Example – Johnny’s Story

Bill and Cindy have a son named Johnny who was born with many medical complications. Johnny was placed on a Medicaid waiver which allows Johnny to qualify for services under Medicaid as a child under the age of 18 without counting Bill and Cindy’s assets or resources. While the private insurance covers Johnny’s basic needs for medical care, Medi-Cal cover’s services that private insurance does not cover.

At age 16 Bill and Cindy established and ABLE Account for Johnny and family members began making the maximum annual contributions. Sadly, John passed away when he was 26 – 10 years after the ABLE Account was established.

At Johnny’s death there was $140,000 in the account. Cindy reported Johnny’s death to the ABLE Program administering his account Johnny had a Medicaid lien that was a total of $130,000 of which $100,000 was incurred after the ABLE Account was established. His lien is $100,000. While this kind of situation is not unusual – of course you need to look at your own situation.

While the Medicaid Payback should be a major consideration when selecting what tool to use, it is only one factor. Basically –this is a 529 plan with a lien for any Medicaid used by the beneficiary from the time the account was created. Compare this with an estate planning special needs trust where there are no liens.

Things to Consider Concerning the Medicaid Lien

Look at present usage as well as future usage of Medicaid. Also look at your state’s definition of medical assistance. As stated earlier, if ABLE Act accounts are treated the same as self-settled special needs trusts, then California’s Department of Health Services would likely count every dollar of Medicaid used including the childhood developmental disabilities waiver is Medicaid used for medical purposes.

Is the ABLE beneficiary currently on Medicaid? Some services for children are based on a Medicaid waiver which is not always apparent.

Is the ABLE beneficiary using Medicaid? Many Medicaid recipients use minimal amounts of Medicaid – some use massive amounts of Medicaid

Does it matter? Some beneficiaries and families don’t mind repaying Medicaid.

The ABLE Act and Housing

One of the greatest challenges that all Americans have is securing affordable housing. For persons with disabilities and their families, especially those on public benefits, the quest for sustainable housing can be daunting. The ABLE Act provides a new tool to assist in persons with disabilities and their families secure housing and in some cases minimize the loss of benefits. Qualified disability expenses are any expenses made for the designated beneficiary related to their disability, including housing.[5]

Although “housing” is listed as a QDE, distributions used for “housing expenses” cause the distribution to be taxable and create a penalty for IRS tax purposes and are a countable SSI resource until spent.

A “housing expense” includes the following distributions:

  • Mortgage (including property insurance required by the bank)
  • Real property taxes
  • Rent
  • Heating fuel
  • Gas
  • Electricity
  • Water
  • Sewer
  • Garbage removal


One of the hardest to understand conundrums that SSI recipients face is what is called the In-Kind Support & Maintenance (ISM) reduction for assistance for a SSI recipient with food and shelter.


Income for SSI Recipients
Unearned Income Earned Income In-Kind Support & Maintenance
Gifts, annuities & pensions, alimony & support, dividends, interest, rents, awards and payment from other benefit programs Consists of wages, royalties, net earnings from self-employment, and any honoraria received for services rendered Actual receipt of food, or shelter, or something that can be used to get one of these.
Reduces benefits dollar for dollar after the first $20 Reduces benefit $1 for every $2 after the first $65 earned monthly Reduces benefits dollar for dollar up to a max. of $264.33 in 2016 (PMV)


Example – A little Help from Friends

Belinda has been disabled from birth, and receives $733 a month in SSI. A major expenditure for her are housing and utility payments. She would like to move to a nicer apartment that would cost $1,000 a month. She will need some assistance in order to make the move.

If Belinda’s parents were to give her $1,000 a month directly it would be counted as unearned income and eliminate her SSI completely. If her parents were to pay the landlord directly – the payments would count as ISM and her benefits would be reduced by $264.33. If instead they were to contribute $1,000 a month to her ABLE Account, and in turn the funds from the account were to pay the landlord then there would be no reduction of SSI.

So if you are a student of the ABLE Act, because payments for housing are subject to a tax penalty and income being imputed to the SSI recipient it would appear that this is not an option, but in fact it is a very viable tool. POMS SI 01130.740 C 4. has the following section;

Do not count ABLE account distributions as income

A distribution from an ABLE account is not income but is a conversion of a resource from one form to another, see SI 01110.600B.4.

Do not count distributions from an ABLE account as income of the designated beneficiary, regardless of whether the distributions are for non-housing QDEs, housing QDEs, or non-qualified expenses.

Therefore, using an ABLE Account in the same calendar month for housing does not cause a reduction in SSI. SSA does count funds taken from an ABLE Account as a resource if the funds are retained into the following calendar month, so timing can be essential. POMS SI 01130.740 F 4. has the following section;

  1. Count retained distributions for housing QDEs and expenses that are not QDEs

Count, as a resource, any distribution or part of a distribution for a housing QDE or an expense that is not a QDE if it is retained into the month following the month of receipt.


Example of a retained QDE for housing


Amy takes a distribution of $500 from her ABLE account in May to pay her rent for June. She deposits the $500 into her checking account in May, withdraws $500 in cash on June 3, and pays her landlord. This distribution, which is a housing-related QDE, is part of her checking account balance as of the first of the month in June, which makes it a countable resource for the month of June.


How would the assistance of Belinda’s family be treated by the IRS?

The IRS does impute a penalty if a distribution is made for a housing QDE, but with planning the impact could be minimal or academic. The 10% withdrawal penalty is only levied on the income on the appreciation portion of the account that is distributed. For example, if Belinda’s parents contribute $1,000 a month at the beginning of each month, and it is immediately used by Belinda of her rent, a non-qualified expense, the penalty would be 10% of $0, and the income to Belinda would be in income earned from investments which is 100% of $0. In addition, by using this strategy, the chances of a lien of the funds is almost nil, because the ABLE Account is a conduit for payments and the account will not build up to be subject to the lien.

Implementation of the ABLE Act Is a Platform to Examine State Laws and Regulations

In California to fully implement the ABLE Act there are a great many state laws and regulations that need to be examined and modified. In addition, there will need to be a great amount of education of judges and program administrators to understand how ABLE Act accounts as well as special needs trusts can be used to better serve persons with disabilities and their families.

Personal Injury Settlements

In California for instance, there is no authority to direct a settlement into an ABLE Account. In order to do that Probate Code 3611 which is California’s law that provides the options allowed in a personal injury settlement would need to be amended. One might also review when a structured settlement might be assigned to an ABLE Account.

Guardianship and Conservatorship Laws

There is no authority in California to put funds from a guardianship or conservatorship in an ABLE Account. We need to amend probate code 2580. In addition, California has no options for successor guardians or conservators. This would be a good opportunity for advocates to review our conservatorship and guardianship laws and not only look at implementation of ABLE, but to look at related issues with an eye towards revision to make our laws more relevant. [6]

Family Law

There is no authority to put child or spousal support payments into an ABLE Account – we need to amend the family law code. There could very well be situations where utilization of an ABLE Account for support payments, especially where the ultimate use for these funds are for housing would be a desirable outcome. In addition, there will be a great deal of education needed for Judges and court staff about when this is a viable or preferred option, and when other options are more desirable.

There are many other examples – and by partnering with disability advocacy organizations, attorneys and policy makers – not only can we work to expand the use of ABLE – but as we put a spotlight on implementation, we can create a dialog of related issues that affect persons with disabilities and their families.

ABLE and Mental Health

To qualify for an ABLE Account, the beneficiary needs to be either receiving SSI or Medicaid prior to the age of 26, or have a doctor’s certification that they met that standard before the age of 26. The diagnosis of a mental illness can come at any time, but it is very common that someone might meet the standard of disability well before the age of 26, but in fact not begin receiving SSI or Medicaid well after 26. There are many mental health advocates that feel that the age 26 requirement eliminates this option for many persons diagnosed with a mental illness. In fact, while this may be true in some cases, there are many persons diagnosed late in life who clearly met the standard of disabled well before the age of 26, and certification of the disability by their doctor may be a very simple solution.

For example, the website states

“Men tend to get develop schizophrenia slightly earlier than women; whereas most males become ill between 16 and 25 years old, most females develop symptoms several years later, and the incidence in women is noticeably higher in women after age 30. The average age of onset is 18 in men and 25 in women.”[7]

For the special needs trust practitioner or pooled trust administrator there will need to be a great deal of education of advocates for persons with mental illness that this is a viable option for many persons with a mental health diagnosis even if they did not receive SSI or Medicaid until well after the age of 26.

Using an ABLE Account with a Special Needs Trust

The rules are still in development, but we are getting strong indications that SSA will take the position that a special needs trust and make distributions to an ABLE Account because it is basically a transfer of an exempt resource to an exempt resource. While we are waiting for written verification of this position, this has the possibility of tying the two tools together to get the best of all worlds.

3rd Party Special Needs Trusts

One huge advantage of a 3rd party special needs trust is that it is not subject to a lien upon the death of the beneficiary. In addition, a 3rd party special needs trust can also be a great tax planning device[8], especially when it conforms to the Qualified Disability Trust rules.[9] [10]Tying these two tools together can allow the trustee of the special needs trust to “feed” the ABLE Account as needed to allow the beneficiary more latitude in making purchases and having more control over spending, as well as being able to use the funds for food and shelter and minimize the ISM reduction.

Self-Settled Special Needs Trusts.

Self-settled special needs trusts might be more problematic because they are subject to a lien upon the death of the beneficiary, and the trustee of a self-settled trust must make sure that all distributions are for the sole benefit of the beneficiary. Many advocates expect that further guidance will come from SSA in the near future (maybe at this conference), but in the meantime for administrators looking at using an ABLE Account tied to a self-settled trust, here are a couple of factors that might be considered.

First, even though the oversight of the ABLE Account itself is not subject to SSA oversight and instead is subject to Department of Treasury Rules, the trustee should make sure that they can account for the payments made and insure that the ABLE Account meets the sole benefit rule. In the example of paying for housing expenses, a self-settled trust making a distribution to an ABLE Account and in turn paying housing expenses when done correctly could increase the SSI a beneficiary receives by over $3,000 a year. In fact, it might be wise if the only use is to pay housing related items and have the beneficiary establish the account, have the trustee make payments to the ABLE Account monthly from the special needs trust, and then become the agent for the ABLE Account through a power of attorney and set up the ABLE account to make reoccurring payments to the landlord.

Secondly, one might want to consult with their state Medicaid department. Some state Medicaid Recovery programs are very aggressive, and may want to disqualify such an arrangement because the standard of Medicaid recovery is less than that of a self-settled trust.

In Conclusion

I personally have talked with the administrators of all 4 ABLE Programs existing at the time of this writing, and I have found each of them very eager to partner with other disability groups and programs including pooled trusts. Each of them are relatively new to public benefits and each are taking a fresh look at how to implement their program. Even if your state does not have an ABLE Program in existence, I urge you to reach out to the existing programs to see how we can help each other reach our objectives to serve persons with disabilities and their families to understand all the options available, and better understand the challenges our communities face.

The ABLE Act provides the special needs trust practitioner whether you are an attorney or an administrator of a pooled trust an unprecedented opportunity to collaborate with other stakeholders and shine a light on the real issue – the need to sustainable funding from all sources to allow persons with disabilities to enjoy a quality of life that the persons that are not disabled take for granted. In addition, not only is this a good opportunity to become more involved in implementation of ABLE Accounts, it is a good opportunity to make meaningful changes to our existing laws and policies to better serve persons with disabilities and their families.[11]


Stephen W. Dale

Trustee – Golden State Pooled Trust

[1] For a webinar on Ohio’s ABLE Program, go to



[4] To learn more the ABLE Act and liens, go to

[5] To learn more about the ABLE Act and Housing, go to

[6] To learn more about capacity issues, go to


[8] See Creating a Tax Wise Portfolio for a 3rd Party SNT featuring Bradley J. Frigon

[9] What is a “Qualified Disability Trust” for Federal Income Tax Purposes?

[10] To learn more about Taxation of an ABLE Account – got to

[11] To view a playlist of videos on the ABLE Act, go to

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