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Question:

I understand that ABLE funds are subject to pay back if the state chooses to do so. Where a state statute (NJ) gives the state up to 3 years after receiving notice of death of a Medicaid beneficiary to decide whether it will seek pay-back from resources, is there any remedy to get a quicker resolution from the state concerning its intentions as to the ABLE balance. It seems unfair to hold the heirs under a cloud of uncertainty for three years while the state is making up its mind.

Response:

I agree, but I don’t believe that there’s a three-year wait in practice. I couldn’t find the three-year deadline on-line so I contacted the New Jersey Division of Medical Assistance and Health Services to ask them how this works. Here’s the response from the New Jersey ABLE Program Representative:

I am unaware of time period regulation surrounding when DMAHS can make a claim for reimbursement. I have seen them occur between approximately three months to approximately 1.5 years after a beneficiary passes.

That’s a wide range, three months seeming eminently reasonable and a year and a half rather long.

But in most cases, family members aren’t going to see any funds in any case. For the uninitiated, ABLE accounts are special bank or investment accounts for individuals who became disabled before the age of 26 (to be changed to age 46 beginning in 2026). The accounts are not counted in determining whether the beneficiary is eligible for Supplemental Security Income (SSI), Medicaid or subsidized housing.

There are a number of restrictions on these accounts. They may only be funded with $19,000 a year (in 2025) and may not exceed $100,000 in total. Upon the death of the beneficiary, the state must be reimbursed from the account for whatever it has paid during the beneficiary’s life for their health care through the Medicaid program. If there are any funds remaining after such reimbursement, they may be paid out to family members or others named as remainder beneficiaries.

Since funds in ABLE accounts are always being used for the beneficiaries’ welfare, they usually don’t accumulate much and whatever they do accumulate is usually entirely eaten up by the Medicaid reimbursement, leaving little or nothing for any heirs.

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Should I Set Up a Special Needs Trust or ABLE Account for My Inheritance? How are ABLE Account Distributions to Heirs Taxed? Can Child’s SSI Benefits be Placed in an ABLE Account?