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Final regulations: ABLE accounts under section 529A

Final regulations: ABLE accounts under section 529A

The U.S. Treasury Department and IRS today released for publication in the Federal Register final regulations (T.D. 9923) as guidance regarding tax-advantaged “achieving a better life experience” (ABLE) accounts.

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The “Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014” (ABLE Act) established the rules for states (or state agencies) to follow regarding federal tax-favored savings programs for eligible individuals with a disability as the owners and designated beneficiaries of ABLE accounts—accounts to which contributions may be made to meet qualified disability expenses. ABLE accounts also receive favorable treatment for purposes of certain means-tested federal programs.

Today’s final regulations [PDF 394 KB] (38 pages as published in the Federal Register on November 19, 2020) finalize proposed regulations and earlier guidance provided by IRS notices. The final regulations:

  • Provide guidance on the requirements a program established and maintained by a state (or state agency or instrumentality) must satisfy to be considered a qualified ABLE program under section 529A
  • Address the requirements for establishing an ABLE account, for qualifying as an eligible individual and thus a qualified designated beneficiary of an ABLE account and for contributions to an ABLE account, including the limitations on the amount and investment of such contributions
  • Provide rules regarding changes in the designated beneficiary of an ABLE account, and rollovers and program-to-program transfers from one ABLE account to another
  • Provide guidance on the gift and generation-skipping transfer tax consequences of contributions to an ABLE account, as well as on the federal income, gift, and estate tax consequences of distributions from, and changes in the designated beneficiary of, an ABLE account
  • Provide guidance on the recordkeeping and reporting requirements of a qualified ABLE program

For background on ABLE accounts (and the prior IRS guidance and proposed regulations), read TaxNewsFlash

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