ABLE accounts are meant to help those with special needs.
Are you an American with special needs?
Do you have a family member with special needs?
If yes, you may be familiar with government assistance for food, housing, health care, and income.
Many benefits such as Medicaid and SNAP have financial eligibility requirements.
How can those with special needs become eligible for benefits without becoming destitute?
According to a recent nj.com article titled “ABLE accounts–A tax advantaged tool for special needs planning,” the Achieving a Better Life Experience Act (ABLE) may help.
It allows an individual who qualifies to set up an ABLE 529 account.
This allows the individual to save or invest to supplement government benefits.
Funds are contributed by the individual, family, or friends after-tax and can grow-tax free.
The funds must be then used for qualified expenses.
Is there a limit?
You can only contribute $15,000 a year.
They are connected to the 529 education account for the individual so moneys contributed to one will impact the other.
If the individual has more than $100,000 in the account, SSI eligibility can be compromised.
If you are an ABLE account owner you can save an additional $12,140 from your earnings for retirement, if your employer does not have an employee sponsored retirement plan.
Another tool for special needs planning is a Special Needs Trust.
ABLE accounts are not meant to replace a Special Needs Trust.
ABLE accounts have greater restrictions and limitations with contributions and disbursements.
A Special Needs Trust may thus be more a desirable alternative, especially in the estate planning context.
What happens when to funds left in the ABLE account when the beneficiary dies?
The government will recover the funds to reimburse itself for any benefits provided during the lifetime of the recipient with special needs.
This will not be the result with a properly drafted Special Needs Trust.
Work with an experienced estate planning attorney to determine how and if an ABLE account can work for you or your loved one.
Reference: nj.com (April 20, 2019) “ABLE accounts – A tax advantaged tool for special needs planning”