Financial woes are something that parents of disabled children often deal with. Doctor’s bills and often finding the right educational institutes that support the needs of their children is enough to break any bank. There is relief in sight for these parents right around the corner. Soon parents of disabled children will be able to take advantage of a program similar to the 529 Plan. It will allow them the chance to save for expenses and enjoy this luxury tax-free. Congress recently passed the Achieving a Better Life Experience Act also known as the ABLE Account.
The ABLE account is designed to help families that are raising disabled children form financial stability and establish a savings plan to cover qualifying expenses for higher learning. Parents will be able to contribute up to $14,000 per person per year. The contributor pays no taxes on this money’s growth. This is only as long as it covers qualifying expenses.
With the ABLE Act set in place disabled students won’t have to wait for Internal Revenue Service tools to be created in order for students to have brilliant future ahead of them. This Act will open doors and establish a brighter future for so many Americans.
A traditional 529 Plan’s expenses may only cover tuition, books, and other fees. For disabled children, this list may be a little longer. They may include:
- Additional health care cost
In the case of a bankruptcy, assets are covered as long as the funds were added two years before the bankruptcy was filed. In spite of the IRS and Department of Treasury being a key asset, ABLE Accounts are going to be offered by state.
To qualify for an ABLE Account, the disability must have developed before the age of 26. In prior years, a disabled person could not possess $2000 or more if they wanted to meet the qualifications for Medicaid or SSI. Holders of ABLE Accounts are able to save up to $100,000 and can still maintain their benefits. If the individual has SSI Benefits, a disabled person under the age of 18 is considered to be disabled if they meet the severe functional limitation test.
Where to Open an Account
Each state has the responsibility of establishing the ABLE Program. If the state decides not to develop the program, they can create a contract with another state to offer their eligible residents with opportunities to open an account.
Once the act is signed, regulations will be developed. Requirements will be established such as, information needed to open an ABLE account, documents needed, and what disabilities qualify. At this time, no accounts can be created until all regulations are finalized. Applications will be taken near the end of 2015.
How Many to Establish
Students with a 529 Plan have the ability to hold an account in a parent and grandparent’s name for one person. Plans could also be established outside of the student’s state of residence. Unlike the 529 Plan where an individual could possess more than one account, the ABLE Act limits the individual to one account per eligible person. ABLE account holders must open their account in their state of residence.
ABLE vs Special Needs Trust
ABLE accounts give the family and recipient more control. The cost is a lot less than a Special Needs Trust. The ABLE Account holder maintains control over their funds in case their situation changes. If that issue arises, they still have options available to them. Finding the right options is determined based on the circumstances of the individual. Several families will benefit significantly over a trust program.
Quotes of Success from Legislation
Unlike many acts that often show disagreements between political parties, this is one act that everyone in congress seems to agree on. Here are some of the quotes from legislation.
- “Pennsylvanians with disabilities face incredible challenges every day. They shouldn’t be penalized simply for trying to save for their future. Congress should use current programs to ensure America’s most vulnerable have the same opportunities that are provided to all citizens.” – Senator Robert Casey Jr.
- “The ABLE Act is about giving people with intellectual and developmental disabilities the opportunity to achieve their dreams. Families are looking for ways to finance things like an apartment, or a ride to work, or additional educational opportunities after high school that don’t jeopardize other necessary services provided by fedreal programs. This bill creates a tool for families that could lead to a more independent and fulfilling life.” – Peter V. Berns, CEO of the Arc
- “This is important, common-sense legislation tha twill provide an incredible financial boost to families affected by autism and other disabilities who are struggling to pay for critical services. If we allow families to save tax-free for college, it is only fair that they be permitted to save to meet the needs of all their children.” – Bob Wright, co-founder of Autism Speaks
To find out more about the ABLE Act stop by US News for more information.