December 28, 2016

ABLE United Key Questions Series: Qualified vs. Non-Qualified Expense

ABLE United Key Questions Series: Qualified vs. Non-Qualified Expense

We’ve answered one of the questions our customer service team most commonly receives in this blog series. Here’s the next:

 

What is considered a qualified expense and what is considered a non-qualified expense?

 

The Federal statute that created ABLE uses the term ‘qualified disability expenses’ and is defined as any expenses related to the eligible individual’s blindness or disability which are made for the benefit of an eligible individual who is the designated beneficiary. These include the following expenses: education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial expenses, and other expenses. [1]

 

Furthermore, the Department of Treasury, which oversees the Internal Revenue Service and would ultimately determine if an expense is qualified or not, proposed [2] that the qualified disability expenses are for the benefit of the designated beneficiary in maintaining or improving his or her health, independence or quality life.  In addition, the term “qualified disability expenses” should be broadly construed to permit the inclusion of basic living expenses and should not be limited to expenses for items for which there is a medical necessity or which provide no benefits to others in addition to the benefit to the eligible individual. For example, if someone uses these funds for a modification to a wheel-chair that is not medically necessary, but would improve the individual’s quality of life, than that would be considered a qualified disability expense. These proposed rules did provide one example: If an individual with a disability uses a smart phone as a safe and effective communication and/or navigation aid, then the expense to maintain that phone, such as the cost of the phone and a cell phone plan, would meet the requirements of a qualified disability expense.

 

Individuals receiving Supplemental Security Income are still subject to Social Security’s resource and assets rules. For example, an individual receiving SSI can own one vehicle as a primary source of transportation and it not count as a resource. If they were to use their ABLE United account to buy a second car, although it may count as a qualified disability expense, Social Security will consider it a change of resource and would count the newly purchased vehicle as a second vehicle, and therefore it would count towards that individual’s $2,000 resource limit based on the equity value of the vehicle. [3] For a more detailed list of what SSI counts as a resource consult your local Social Security office or visit https://www.ssa.gov/ssi/text-resources-ussi.htm.

 

Regardless of why and how you are using these accounts. It is in your best interest to keep proper documentation and records for all withdrawals from an ABLE United account.

 

Stay tuned for the next blog post in our series covering the most commonly asked questions about ABLE United.

 

Cited Resources:
[1] https://www.congress.gov/bill/113th-congress/house-bill/647/text
[2] https://www.federalregister.gov/articles/2015/06/22/2015-15280/guidance-under-section-529a-qualified-able-programs#h-19
[3]  https://secure.ssa.gov/poms.nsf/lnx/0501130200