“I have heard the ABLE accounts can be funded, is this true?”
Randall, thank you for your question.
The ABLE Act (Achieving a Better Life Experience) was passed in December, 2014 and was finalized at the end of 2015 at a federal level. The ABLE Act cleared the way for individuals with a disability to save more than $2,000 and still be able to qualify for life-supporting government benefits. During 2015, many states passed laws authorizing the use of ABLE Accounts for individuals that qualify. We are finally at a point where select states are now allowing individuals to open ABLE Accounts.
Due to a change in the rules surrounding ABLE Accounts, qualifying individuals can open an ABLE Account in a state where they do not live, which means it is not necessary to wait for your state to offer ABLE accounts in order to open an account.
A qualifying individual for an ABLE account must have been diagnosed with a disability before the age of 26, and either must be receiving Supplemental Security Income (SSI) or Social Security Disability Income (SSDI), or have a certification from a physician indicating that he/she has a marked or severe functional limitation that was diagnosed before the age of 26, which is expected to result in death or has lasted/can be expected to last for a continuous period of not less than 12 months, or is blind.
At this time there are four states that offer ABLE Accounts: Ohio, Tennessee, Nebraska, and Florida. You can visit their websites to learn more about opening an account.
Although the ABLE Account can be a very good tool if used in the right situation, there are drawbacks that you must be aware of:
- Annual Funding limitations based upon the annual gift tax exclusion amount ($14,000 in 2016)
- Only one account permitted per qualifying individual
- Maximum funding of $100,000 before losing SSI (a monthly income that is used for many individuals to fund housing and other necessary life-long supports)
- Payback Provision to Medicaid at the passing of the individual with the disability (meaning any remaining money in the ABLE Account, at death, will be susceptible to government payback)
As with any available Special Needs Planning Tool, it is important to understand how best to use The ABLE Account for your own family’s specific situation before jumping in! Please seek professional advisors with the expertise to help you make the best decisions.
For more information on how to prepare for the future, be sure to contact a financial advisor who specializes in serving families with special needs. A Special Needs Plan is driven by what they call Unleash L.I.F.E.™- L.I.F.E. meaning Lasting Independence For Everyone™. This is accomplished with education, action, and support in the creation, implementation, and continued monitoring of a specifically designed lifelong and integrated plan for your family: parents, caregivers, your loved one with special needs and their siblings.
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This article was featured in Issue 51 – School: Preparing Your Child for Transition