The MLO Minute: “PA ABLE Savings Program Announces Updates” —
By Jillian Zacks, Esq., MLO’s Estates and Trusts Department
The PA ABLE Savings Program, administered by the Pennsylvania Treasury Department, recently announced changes to PA ABLE accounts. The updates were instituted to comply with regulations set forth by the Internal Revenue Service. Four important changes went into effect on November 20, 2022. Not all accounts are impacted by these changes, but it is good to be aware of them.
- The hierarchy of authorized individuals has been expanded. Prior to the changes, the only individuals who could open and manage an account on behalf of a minor or an adult who lacks legal capacity to enter a contract, an Authorized individual, were a:
- Representative Payee
- Trustee of a trust for which the account owner is the beneficiary; or,
- Someone appointed by a parent or guardian
IRS regulations expand who can be an Authorized Individual and has defined a hierarchy of the order of priority.
The new order of priority for Authorized individuals effective currently (as of 11/20/2022) is as follows:
- Power of Attorney
- Legal Guardian or Conservator
- Representative Payee
For accounts that were opened or are currently being managed by an Authorized individual, that Authorized Individual should confirm that there are no other individuals who are willing and able to manage the account who have higher priority.
- Prospective Authorized Individuals must provide documentation. When individuals wish to establish themselves as Authorized Individuals for account owners who are minors or lack capacity to enter a contract, they will be required to provide documentation proving their relationship to the account owner. This individual will certify under penalty of perjury that, to the best of their knowledge, there is nobody with a higher priority who is willing and able to exercise authority as Authorized Individual. PA ABLE will require documentation specific to the individual relationship for all Authorized Individuals. The documentation required will depend on the relationship of the Authorized Individual and account owner. The required documentation for the Authorized individual is as follows:
- Agent under Power of Attorney- Power of Attorney document
- Legal Guardian or Conservator – Court Order or other documentation granting guardianship of the estate of conservatorship
- Spouse – Marriage certificate
- Parent- Birth certificate of account owner
- Sibling – Birth certificates of account owner and sibling.
- Grandparent – Birth certificate of account owner and the parent of the account owner who is the child of the grandparent who wishes to be the Authorized individual
- Representative Payee- Letter from Social Security Administration granting Rep Payee status
In a recent call to the PA ABLE assistance line, the representative indicated that a copy of the document can be uploaded to the account owner’s online account.
- PA ABLE account owners can now appoint an Authorized Individual and Successor Authorized Individual. IRS regulations now allow an adult PA ABLE account owner who has legal capacity to enter into a contract to appoint a person of their choosing to open and manage their PA ABLE account, the Authorized Individual. This means the account may now be managed by any other person of the account owner’s choosing regardless of the relationship between the account owner and this person.
- An account owner may now appoint a successor account owner. PA ABLE account owners may now select an Eligible Individual (see paable.gov for full definition of “Eligible Individual”) who is a sibling, including step-siblings and half-siblings, of the current account owner to become the owner of the PA ABLE account in the event of the current account owner’s death. This means that the PA ABLE account will transfer directly to the successor owner’s PA ABLE account upon the original account owner’s death. Example: A, the account owner has a sister, B who was diagnosed with a disability prior to age 26 and is an Eligible Individual with her own ABLE account. A can designate B as the successor owner of his account. Upon A’s death, the assets remaining in his ABLE account will transfer to B’s account. If you have any questions, please do not hesitate to reach out to us!