Creating an ABLE Account for a Child With Special Needs

Creating an ABLE Account for a Child With Special Needs

Creating an ABLE Account for a Child With Special Needs

If you are a parent or a guardian of a child with special needs, you know the added costs of raising a child in this situation. The Achieving a Better Life Experience (ABLE) Act lets you create a tax-free savings account for your child without jeopardizing other public assistance.

Until this act, you couldn’t save more than $2,000 a year without risking eligibility for other public assistance programs. These accounts run like a 529 plan that lets friends and family contribute up to $14,000 per year to the account. Like the 529 plans, states regulate the specifics of ABLE accounts.

  • Once signed into law by President Obama, people should be able to set-up ABLE accounts sometime in 2015. Before accounts can be set up, regulations will have to be written and ABLE programs established in each state.
  • Eligible individuals for an ABLE account are those who become disabled before age 26 and (1) receive Social Security Disability Insurance (SSDI) or SSI; or (2) files a disability certification under rules that the IRS will write.
  • Disability expenses covered under ABLE are those made for the benefit of a disabled individual; such as education; housing; transportation; employment training and support; assistive technology and personal support services; health, prevention, and wellness; financial management and administrative services; legal fees; expenses for oversight and monitoring; funeral and burial expenses; and any other expenses approved under regulations.
  • An ABLE account only affects Supplemental Security Income (SSI) benefits if the ABLE account exceeds $100,000. SSI benefits would be suspended but not terminated. In other words, the beneficiary of the account would not receive a check but would retain eligibility for the SSI program.
  • An ABLE account does not impact Medicaid eligibility.
  • ABLE regulations may differ in each state.  Although federal law applies uniformly to all states, individual states may regulate ABLE accounts differently. Under current law, states provide different tax benefits for college savings accounts, which are similar to ABLE accounts.
 

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