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ABLE Accounts Help Families Save for Children With Disabilities

Posted Jessica L. Kurtz on Mar 14, 2015 in Social Security Disability

For decades, families have been able to save money for their children’s college and higher education in a 529 savings account, where the money would be untaxed. These 529 accounts have proven to be immensely popular and successful, but often left families that were raising children with disabilities wondering how they may be able to save for their own children’s future.

In a surprising move, Congress passed an act in the last minutes of 2014 called the Achieving a Better Life Experience (ABLE) Act, which created a similarly tax-free account known as a 529A. These 529A accounts, or ABLE accounts, allow parents of children with disabilities the opportunity to set aside up to $14,000 annually to enjoy tax-free growth. This money can be used on a wide variety of approved expenses, including special education, care, housing, and health care for their child living with disabilities.

Lawmakers anticipate each state will offer ABLE accounts by the end of the year, and estimate that this could affect nearly six million people.

The Nuts and Bolts: What Will ABLE Accounts Mean for Families Receiving SSI Benefits?

While the idea of the 529A account may seem initially appealing, many families that are raising a child with disabilities may wonder how having significant monetary assets in an account like this would affect Supplemental Security Income (SSI) benefits that the child already receives.

While rules currently limit monetary assets to $2,000 to qualify for SSI, ABLE accounts will be exempt up to $100,000. This is encouraging news for families who want to plan for their child’s future without endangering the benefits that will help support them throughout their life.

Why the ABLE Act Matters

Millions of families throughout the United States have at least one family member with special needs. While children with special needs and disabilities are often eligible to receive SSI benefits, parents often take on the role of caregiver for the rest of their lives. One of their primary worries is saving for their child’s care, housing, and needs after both parents pass, and the new 529A ABLE accounts will allow this to happen without jeopardizing SSI or Medicaid benefits.

Previously, estate planning for parents of children with disabilities was very challenging, as any monetary resources left to the child would cause SSI benefits to halt. Most parents relied primarily on special needs trusts exclusively, but these trusts could be very challenging to set up and maintain—a problem for families with limited resources.

While these new accounts have yet to become available, they are on the way—and it may be beneficial to many Pennsylvania individuals and families. If you are in the process of applying for SSI benefits for your child, contact us today for a free consultation.