ABLE Accounts
5 Things to Know
Dear Special Parent,
As a parent of a child with disabilities, ensuring their long-term security and well-being is likely one of your top priorities. In your journey of financial planning, you may have come across Special Needs Trusts (SNTs) as a crucial tool. However, another important option to consider is an ABLE account. These accounts offer unique benefits and considerations that can complement your overall financial strategy. Here are five key insights into ABLE accounts that every special parent should know:
1. Purpose and Benefits of ABLE Accounts
Much like Special Needs Trusts, ABLE accounts are designed to help individuals with disabilities maintain eligibility for government benefits such as Medicaid and Supplemental Security Income (SSI). These accounts provide a way to save and invest funds without jeopardizing access to these vital support programs. Additionally, earnings in ABLE accounts grow tax-free, providing an opportunity for long-term financial growth.
2. Eligibility and Contribution Limits
Eligibility for an ABLE account is typically based on the onset of the disability and must have occurred before the age of 26. Each state sets its own guidelines for eligibility, but individuals who meet the criteria for receiving SSI or SSDI benefits are generally eligible to open an account. Contribution limits vary by state but are typically set at $15,000 per year, allowing family members and friends to contribute to the account without impacting eligibility for government benefits.
3. Qualified Expenses and Flexibility
Funds in an ABLE account can be used to cover a wide range of qualified disability-related expenses, including education, housing, transportation, healthcare, and assistive technology. This flexibility allows individuals with disabilities to maintain independence and improve their quality of life by accessing the resources they need to thrive.
4. Impact on Government Benefits
Similar to Special Needs Trusts, funds held in an ABLE account are generally not counted against the asset limits for means-tested benefit programs like Medicaid and SSI. However, there are certain limitations and considerations to keep in mind, such as the impact on Medicaid eligibility if the account balance exceeds a certain threshold. It's important to stay informed about any changes to legislation or policies that may affect the use of ABLE accounts and government benefits.
5. Choosing the Right ABLE Program
Each state offers its own ABLE program, and it's essential to research and compare the options available to find the one that best meets your needs. Consider factors such as investment options, fees, and account management features when selecting an ABLE program. Additionally, some states allow non-residents to open accounts, so explore all available options to find the most suitable fit for your family.
Incorporating an ABLE account into your financial planning alongside a Special Needs Trust can provide additional flexibility and support for your child's future. By understanding the purpose, benefits, and considerations associated with ABLE accounts, you can make informed decisions that contribute to your child's long-term financial security and well-being.
Dr. Kimberly
Dr. Kimberly Idoko
Certified Special Parent Coach
Dr. Kimberly is the mother and fierce advocate of Aiden and Lexi; Lexi is developmentally disabled by Rett Syndrome. Dr. Kimberly is a board-certified neurologist in clinical practice for more than 15 years; she is also a children’s rights attorney — the former director of healthcare advocacy at a Los Angeles-based legal agency. She is Yale College, Penn Medicine, Columbia Business, and Stanford Law trained.
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