The Achieving a Better Life (ABLE) Act was signed into law in 2013. This lets individuals with disabilities create tax-advantaged savings accounts.
ABLE accounts let citizens with disabilities save money in tax-exempt savings accounts. It enables them to save money and receive federal public benefits. Prior to the ABLE act, parents had trouble saving for their children because of the potential to lose benefits. An individual with a disability could not have more than $2,000 in savings and assets, otherwise they would lose benefits like Supplemental Security Income (SSI) and Medicaid. Since the establishment of the new law, eligible individuals and their families and friends could contribute $15,000 per tax year. The account limit is about $300,000 per plan in many states. The individual must have only one ABLE account at any given time.
Opening an Account
An ABLE account can be opened by a beneficiary, parent, guardian/conservator, or agent designated through power of attorney. The application process can be done online. There are several requirements for eligibility.
First, the onset of your disability must be before your 26th birthday. This doesn’t mean that you can’t create an account if you’re older than twenty-six. Rather, you must have the disabling condition prior to your 26th birthday.
The second requirement is that your disability must meet the severity requirements. You must be receiving SSI or SSDI (Social Security Disability Insurance). If you are not a recipient of any of these benefits, but meet the age requirement, you could still be eligible if you have one of the Social Security Administration’s Compassionate Allowances Conditions and a letter from a licensed doctor certifying that the beneficiary meets Social Security’s definition of disability.
The information asked during the online application process will include the name, address, social security or tax payer identification number, birth date and email address of the beneficiary. If the account is being opened by a non-beneficiary (i.e., family member), their personal information will be required. Those who wish to transfer funds electronically must provide their bank account and routing numbers.
Managing the ABLE Account
An ABLE account may be used for “qualified disability-related expenses.” These could include expenses that involve education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services, and many more. The funds in the ABLE account can be invested in various options based on risk tolerance.
Investment options differ based from one program to the next. You may lose or gain assets based on the investment option of your choice. In addition, there’s no need to channel your ABLE account funds into one investment—instead, you can opt for many. Each investment option has its own asset-based fee. If you’re not too sure about your chosen investment option, you can opt to change it twice per year.
ABLE programs also offer FDIC Insured Savings Accounts. These accounts offer risk-free savings and are more beneficial than various investment options which may be impacted by gains or losses.
Getting Started with ABLE
Fortunately, getting started with ABLE is easy as long as you know the rules for eligibility and requirements. You can head over to www.ablenrc.org to learn more information about how you or your disabled loved one can open and manage an account.