Notice 2015-18 [PDF 13 KB] announces that the IRS and Treasury Department anticipate issuing proposed regulations that will provide that the designated beneficiary of an ABLE account is the owner of the account.
Notice 2015-18 also provides that, with regard to the ABLE account of a designated beneficiary who is not the person with signature authority over that account, the person with signature authority may neither have nor acquire any beneficial interest in the account and must administer the account for the benefit of the designated beneficiary.
New section 529A—added to the Code in December 2014—permits a state (or a state agency or instrumentality) to establish and maintain a new type of tax-advantaged savings program, a qualified ABLE program, under which contributions may be made to an ABLE account that is established for the purpose of meeting the qualified disability expenses of the designated beneficiary of the account who is a resident of that state and who is disabled.
Section 529A also includes a mandate for regulations or other guidance to implement the section 529A provisions to be issued no later than June 19, 2015.
Today’s notice states that the IRS and Treasury are aware that several state legislatures currently are in the process of enacting enabling legislation that would allow their citizens to create ABLE accounts during 2015.
Currently, the IRS and Treasury are working on section 529A guidance. However, it may be that some states set up their ABLE programs before the guidance can be issued. Accordingly, Notice 2015-18 states that such ABLE programs set up by states, and ABLE accounts established by individuals, will not fail to qualify for and receive the benefits of section 529A merely because the enabling legislation or the account documents do not fully comport with the IRS/Treasury guidance when it is issued.
The IRS and Treasury also intend to provide transition relief with regard to necessary changes so that the state programs and accounts meet the requirements in the anticipated guidance, including providing sufficient time after issuance of the guidance in order for changes to be implemented.
For those states that are moving forward before the issuance of additional guidance, today’s release provides advance notice of certain important ways in which future section 529A guidance is expected to differ from the section 529 proposed regulations so that states promulgating rules may appropriately reflect a fundamental statutory requirement.
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