Since federal passage of the ABLE Act in 2014, our in-boxes have been full of questions and our newsfeeds overrun with information. From question like… “Who is eligible” to… “How do I participate” to… “Will I lose my disability benefits”… we’re here to answer your most frequently asked questions and tell you exactly how to take full advantage of this new federal tax law that can help you save money and secure your future.
An ABLE Account is a state sponsored program designed to help individuals with special needs save tax-free money without jeopardizing S.S.I., Disability or Medicaid benefits. In the past disabled individuals were generally restricted from having more than $2,000 in savings or other assets in order to be eligible for Medicaid or Supplemental Security Income. Now in most cases; through an ABLE account, disabled individuals can save up to $100,000 for short-and-long term goals in a special account without losing Social Security and other government benefits.
To qualify for an Able account, a person must have become blind or disabled before age 26. The disabled person, or his or her relatives and friends, can all contribute money to the accounts. The funds can be invested, and the money may be withdrawn tax-free for a range of eligible expenses.
As of February 2016, 35 states, including Florida, Ohio and Nebraska, have indicated they will offer the accounts this year, while others won’t until 2017. Each state program is expected to be somewhat unique meaning that one program or another could be particularly advantageous to different individuals depending on their circumstances.
Able accounts are designed to help individuals who are capable of handling their own finances. Therefore, Able accounts are owned by the disabled individual, who has direct access to the funds (unless a parent or legal guardian makes decisions for the person).
There is a relatively low contribution limit for Able accounts. Yearly contributions to Able accounts are capped at $14,000 for now, and can grow to $100,000 without putting federal benefits at risk. If the account exceeds the total cap, benefits like S.S.I. payments would be suspended until the balance is spent down. Some states, however, may set much higher total contribution limits. Another downside is that after the beneficiary’s death, states can seek repayment from Able accounts for the cost of care covered by Medicaid.
The ABLE National Resource Center is an excellent website designed to help families, financial professionals and program administrators navigate the laws, regulations and specific product offerings available.
When you visit the site, you will have the option of comparing one program to another by using a list of 15 to 20 variables a potential beneficiary and their family should consider when choosing a program. You can also learn information about the law, ABLE accounts, who qualifies and the particulars of each state’s legislation.
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