ABLE accounts allow people with disabilities to save money [by Paul Lorrah]
ONE OF THE MOST important developments in special needs planning was the Achieving a Better Life Experience Act of 2014 [ABLE], which created ABLE accounts.
These tax-advantaged accounts have become more widely available in the past few years and are a valuable tool for people with disabilities.
An ABLE account allows people with disabilities to build their own savings without affecting their eligibility for government benefits.
Whether you have a child with special needs or you're an adult of any age who developed a qualifying disability before age 26, you can benefit from saving in an ABLE account to use for current expenses or to build tax-free savings for the future.
How ABLE Accounts Work
ABLE accounts are easy to open, and you can usually get started with $50 or less.
Most states offer them (now available in 41 states and the District of Columbia), but you can generally invest in any state's plan.
Your contributions may be tax-deductible depending on the state. You can contribute up to $15,000 per beneficiary in 2020 [more for disabled people who are working].
Most plans let you invest the money in an FDIC-insured savings account and use it for current expenses, or you can choose from a handful of mutual funds to build up savings for the future.
You can then withdraw the money tax-free for qualified disability expenses – with a very broad definition that includes almost anything to benefit the person with the disability.
Note: the funds in an ABLE do not count toward asset tests for government benefits, such as Medicaid, food assistance (SNAP) and housing assistance programs.
Additionally, up to $100,000 in the ABLE account does not count as assets for Supplemental Security Income, or SSI, eligibility, which is usually only available for people with assets of $2,000 or less in their own name.
"The ABLE account is an extraordinary opportunity for people with disabilities who have not had the freedom or flexibility to be able to put money aside in a savings account without fear that the money would count as an asset and violate the means-testing eligibility for a variety of government programs," says Michael Morris, founder and strategic advisor for the National Disability Institute.
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