Recently passed by Congress and signed into law by President Obama, the Achieving a Better Life Experience (ABLE) Act provides the opportunity for those who became disabled before the age of 26 to set up tax-free savings accounts where they will be able to save $14,000 a year without affecting their eligibility for government benefits.
Before the ABLE Act, to be eligible for government programs like Medicaid or Social Security, those with special needs could not have assets in their name surpassing $2,000.
The new tax-free savings account under the ABLE Act allows those with disabilities to save for qualified expenses, such as treatment, education, or housing, and this savings will not impact benefit eligibility as long as it remains under $100,000.
ABLE accounts (529A Accounts) will be available through state programs that will also provide investment options to those who qualify. These accounts provide a wonderful opportunity to enhance the quality of life of those with special needs who were previously unable to save money without fear of losing their much-needed benefits.
One drawback to the new accounts is that they are only available to those who became disabled at a young age. Those who become disabled later in life must seek other options such as traditional special needs trusts.
Because there are a number of caveats to the spending of the funds within an ABLE account, it is important to speak with a special needs planner to discuss your options and make certain that your special needs plan is properly executed.
Attorney Sheryl J. Dennis is a member of the Academy of Special Needs Planners and is experienced in all aspects of special needs planning.