Through ABLEnow accounts, individuals with disabilities can save money to pay for qualified disability expenses. The two unique advantages of ABLEnow accounts are:
- The earnings are not taxed.
- The disabled person does not lose eligibility for certain means-tested government benefit programs.
The acronym ABLE stands for Achieving a Better Life Experience. For persons with disabilities, the ABLE Act, enacted in 2014, is the most significant federal legislation to address their needs. ABLE authorizes states to establish tax-advantaged savings programs to help disabled individuals handle the significant costs of living with a disability.
The ABLE Act allows eligible individuals with disabilities the ability to establish, or to have established for them by their legal representatives, “ABLE accounts” that are similar to 529 college savings plans, although the expenditures from the ABLE accounts must be on “qualified disability expenses.” ABLE accounts are controlled by the disabled beneficiary, and allow a disabled individual more choice and control over spending on qualified disability expenses, while preserving the individual’s eligibility for needs-based public benefits, such as Medicaid and Supplemental Security Income (“SSI”).
An individual can only have one ABLE account and the person who benefits from the account is considered the owner of the account. ABLE accounts may only be established for individuals whose onset of disability was prior to age 26. Funding of an ABLE account is limited to the annual gift tax exclusion (currently $15,000); provided, however, a disabled individual who works is able to make ABLE contributions above the $15,000 annual cap from their own income up to the Federal Poverty Level, which is currently $11,770 for a single individual, provided they do not participate in their employer’s retirement plan.
In our own state of Indiana, the ABLE program is called INvestABLE Indiana, and it is designed to help individuals who suffer from disabilities save, while preserving their SSI and Medicaid benefits. Within the plan, there are seven different investment options available, including a checking account with Fifth Third Bank (accessible through a debit card), and conservative, moderately conservative, moderate, growth, moderately aggressive, and aggressive investment funds (managed by Blackrock, Vanguard, and Schwab).
“The physical plight of the disabled is obvious, but the financial obstacles they face, while less evident, are equally disheartening,” explains incharge.org. “Disabled Americans face escalating challenges in finding employment, earning a living, avoiding poverty and staying healthy.”
Before the ABLE Act, additional sources of funds would often disqualify disabled persons from collecting benefits from SSI or Medicaid. A great benefit of ABLE accounts is that the disabled account owner does not lose eligibility for government benefits despite the value of the account being over the resource limit for means-tested government benefits.
At Rebecca W. Geyer & Associates P.C., we often work with parents of special needs children, developing personalized estate plans that offer ongoing protection for their children.
A special needs trust can significantly help your loved one by providing ongoing financial resources, but an ABLE account is another alternative which may be of use.
ABLE accounts go a long way towards enabling Indiana families to provide a better standard of living for a special needs family member!
– by Jennifer Hammond, Associate Attorney, Rebecca W. Geyer & Associates