Reveal the features and benefits of ABLE accounts for individuals with disabilities
June 23, 2023
There are several financial tools specifically designed for individuals with disabilities. ABLE (Achieving a Better Life Experience) account is one of those options. ABLE accounts are special savings accounts designed to help individuals with disabilities and their families save and invest funds for disability-related expenses.
The ABLE Account was created with the passage of the ABLE Act in 2014 to provide a way for individuals with disabilities to keep funds without jeopardizing their eligibility for government benefits such as Medicaid and Supplemental Security Income (SSI). intended to provide. Because Medicaid and SSI are need-based programs, if your traditional savings or assets exceed certain resource limits, you may be disqualified from these programs. ABLE accounts allow individuals to save up to the permitted limit without compromising eligibility for important benefits.
Let’s take a look at some of the main features and benefits of ABLE accounts.
Qualification: To be eligible for an ABLE account, an individual must have developed a disability before the age of 26 (current). The disability must be physical or mental and significantly impair the ability to carry out daily activities. Passage of the Secure Act 2.0 will adjust the eligibility age to her 46 in 2026. For example, if a 52-year-old person had a disability that began before the age of 46, that person could qualify for her ABLE account.
tax-effective savings: Contributions to the ABLE account are made in after-tax dollars, while account earnings are increased tax-free. Withdrawals are also tax-free if used for eligible disability costs. This tax benefit may result in additional savings when meeting disability-related needs. In addition, some states also offer state income tax deductions or deductions for contributions to ABLE accounts.
Contribution limit: Annual contribution limits vary by state, but generally match the annual gift tax exemption, which is $17,000 as of 2023. This annual contribution can come from beneficiaries or others, but cannot exceed the annual limit.
Additionally, if the beneficiary is working and earning taxable income, they may also contribute an amount equal to their earnings for the year or the federal poverty limit for single-person households ($13,590 in 2023), whichever is lower, to the ABLE account. can. Beneficiaries may make this contribution only if they are not participating in an employer-sponsored retirement plan.
Current tax law also allows rollovers from 529 plans to annual limits to ABLE accounts. The amount transferred will count towards your annual contribution in the year you roll over the funds.
Impact of Supplemental Securities Income (SSI): The first $100,000 of the ABLE account is exempt from the SSI asset limit. If your account balance exceeds $100,000, the excess will count toward your beneficiary resource limits for SSI purposes. However, Medicaid eligibility is unaffected regardless of account balance and provides vital health coverage.
Medicaid repayment terms: The ABLE account may be repaid to the state Medicaid Agency for Medicaid provided to the beneficiary from the amount remaining in the account at the time of the beneficiary’s death. There is some state discretion in this rule, and when researching ABLE programs, please consider that some states do not require collections from account holders who are also residents.
Eligible disability costs: ABLE accounts give you flexibility in how you use your funds. Qualified disability costs cover a wide range of needs, including education, housing, transportation, medical care, assistive technology, and employment training and support. Account holders can decide how to allocate their funds based on their unique circumstances and priorities, so they can tailor their savings to their specific needs and goals.
economic empowerment: ABLE accounts promote the economic empowerment and independence of individuals with disabilities. By managing your own funds, you can decide how to allocate your savings to meet your specific disability-related expenses. This level of financial independence increases self-determination and improves overall quality of life.
interstate portability: ABLE accounts are generally portable. This means individuals can open accounts in any state that offers an ABLE program. This flexibility allows individuals to choose state programs with desirable features, investment options, fees, and other factors, even if they are different from the state they reside in. It is important to note that each state operates its own her ABLE program (similar to the 529 plan) and the specific details and features of the account may vary from state to state. We encourage you to research and compare her ABLE program offerings in various states to determine which one fits your specific requirements.
ABLE accounts are powerful tools for individuals with disabilities to improve their quality of life. Understanding the features and benefits and researching the different types of plans available are the first steps. Please refer to. Able National Resource Center for more information. In addition, consulting a financial advisor who specializes in special needs planning and an attorney who specializes in disability law can provide more personalized guidance on what is right for your unique situation.