A Financial Boost for Americans with Disabilities
Saving for future expenses can be challenging, and saving for disability-related costs includes another piece to the puzzle. Numerous families with a handicapped relative have to save for substantial out-of-pocket expenses and develop a suitable balance while continuing to get approved for access to federal government programs such as Social Security Disability Insurance (SSI).
Households facing this savings challenge might benefit from a new law enacted in late 2014 - the ABLE (Achieving a Better Life Experience) Act. Created to work much like a 529 college savings strategy, the law permits an ABLE account to be funded on behalf of individuals with a physical or mental special needs that occurred before age 26, regardless of their present age.
Receiving Social Security Disability Income benefits; or
File an impairment certification with the IRS to show credentials.
A tax-advantaged cost savings chance
Families can presently reserve as much as $14,000 per qualified person each year in an ABLE account. Money accumulated can be made use of to pay present and future expenditures, so tax advantages can be extended over the life of the covered person. Incomes grow tax deferred, and funds utilized to meet certified expenses for the benefit of that person can be withdrawn on a tax-free basis.
The term "certified expenses" is broad in scope, and can include health care expenses, assistive innovation, personal assistance services and real estate. It also can use to education-related expenses such as unique education services and the costs of paying a tutor. Even legal fees, financial management services, funeral service and burial costs can be spent for out of an ABLE account using tax-free proceeds.
An asset security strategy
Households might face the obstacle of managing their capability to save while remaining to receive federal benefits through programs like Social Security Disability Insurance (SSI). Previous laws made it difficult to save considerable amounts for disability-related expenditures without risking the loss of federal benefits. Under the new law, as long as the ABLE account does not surpass $100,000 in value, complete qualification for SSI advantages continues. If the account must surpass $100,000, those advantages may be suspended, but not terminated. Eligibility for SSI coverage is retained and resumes when the balance of the account once more falls below $100,000. The amount of assets kept in an ABLE account does not affect eligibility for Medicaid protection.
Discuss your options
Individual states might have various regulations regarding ABLE accounts when they begin to offer them. The ABLE account must be purchased from the state where the handicapped person is a resident. If the state of residency picks not to offer an ABLE account that state might contract with another state, and then that state program becomes one the disable individual should utilize.