The Achieving a Better Life Experience Act, or ABLE, can help the families of the disabled plan for a better future.
Here are some of the most important things you should know.
1. What’s an ABLE account?
They’re tax-advantaged savings accounts where the beneficiary is the owner, and income generated by the account is not taxed. Contributions can be made by family members such as the individual’s parents.
The accounts do not affect the disabled individual’s eligibility for a variety of need-based benefits like Supplemental Security Income (SSI) or Medicaid, even though it exceeds the maximum resource limits for those programs.
2. Who is eligible?
To qualify for this account, the disabled person has to acquire their disability prior to age 26. Generally, their disabilities are severe enough to qualify them for Supplemental Security Income or Social Security Disability benefits.
It’s important to note that the disabled individual doesn’t have to have the account (or entitlement to any disability program) before turning 26. It’s enough that the disability was severe prior to that time to qualify for this account.
3. How can the account be used?
These accounts can be used to cover any qualified expense related to the disability. That could include expenses related to housing, transportation, training for employment, education, adaptive devices, technology, financial management and personal support services. As long as the expense helps improve the disabled individual’s quality of life, it’s generally an acceptable expense.
4. How are ABLE accounts different from trusts for special needs?
They generally offer more flexibility. If the circumstances change, the money can still be accessed — unlike the special needs trust.
Ultimately, you don’t want to invest in any program without doing a lot of research and obtaining careful advice regarding special needs planning. What’s right for one family and one disabled person might not be right for your family.
Source: Journal of Financial Planning, “Incorporating the ABLE Act into Special Needs Planning,” accessed April 11, 2018