ABLE Accounts: Things You Should Know
If you have a disability, you’re already familiar with the many financial challenges that can present along with it. From medical expenses to housing and transportation costs, many extra considerations exist. But did you know there’s a type of account specifically designed to help people with disabilities save money? It’s called an ABLE account, and it could be a helpful tool for you to use.
What is the ABLE account?
An ABLE account is an account for people with disabilities. The money in the account can cover various disability-related expenses, including housing, transportation, education, and more. One of the helpful things about ABLE accounts is that they don’t affect your eligibility for certain government benefits, like Medicaid. This means you can save money without worrying about losing vital assistance. It was created by the Achieving a Better Life Experience (ABLE) Act, passed into law in 2014.
How do ABLE accounts work?
ABLE accounts are similar to other savings accounts, but there are key differences. First, you can only open an ABLE account if you have a qualifying disability with a license from a physician. This generally means that you must have been diagnosed with a disability before age 26. Although there are some exceptions, this is generally the rule. For example, if you’re over 26 but became disabled before the individual’s 26 birthday, you still qualify.
What are the pros of an ABLE account?
ABLE accounts offer several benefits for people with disabilities. First, they can help you save money for your future. This feature can be particularly useful if you cannot work or have high medical expenses.
Second, the money in your ABLE account is tax-free, meaning you can keep more of your money. Third, ABLE accounts can help you maintain eligibility for certain government benefits, like Medicaid. This is because the money in your ABLE account is not counted as income when determining your eligibility.
Are there any drawbacks to ABLE accounts?
It’s a great idea to be aware of a few potential drawbacks to ABLE accounts. First, you can only contribute a limited amount of money to your account each year. This limit is currently set at $15,000 per year. However, the amount can be increased occasionally due to inflation.
Second, if you have more than $100,000 in your ABLE account, you may lose your eligibility for certain government benefits, such as SSI, until the balance in your account goes back below $100,000. This is something to remember if you consider using an ABLE account as a long-term savings tool. This doesn’t affect Medicaid eligibility. Overall, though, ABLE accounts can be a helpful way to save money and plan for your future.
Which expenses are allowed by ABLE accounts?
The money in your ABLE account can cover various disability-related expenses. These include things like housing, transportation, education, and more. The money can generally be used for any expense that improves your quality of life or helps you maintain your health and independence.
Can I have two or more ABLE accounts?
No, you are only allowed to have one ABLE account.
Do I have to wait for my state to establish a program before opening an account?
No, you don’t have to wait for your state to establish a program. The ABLE National Resource Center has information about each state’s programs and a list of states that accept out-of-state applications. You can always open an account in any state that offers ABLE accounts.
Do states offer options to invest in savings from an ABLE account?
Yes, some states will offer investment options for ABLE account holders. Account contributors will be able to choose how their money is invested, and they will be able to change their investment choices up to two times per year.
How is an ABLE account different from special needs or pooled trust?
ABLE accounts are more flexible compared to special needs trusts or pooled trusts. With an ABLE account, you can use the money for many expenses without getting approval from a trustee first.
How to Know Which State ABLE Program is Right for Me?
The ABLE National Resource Center has information about each state’s programs and a list of states that accept out-of-state applications. You can also contact your state’s disability office or Medicaid agency for more information.