Hello everyone,

Financial life planning for people with special needs is very personal for me. For most of her life, my sister, Kelly, has had a lot of health issues which have kept her from working. She lives on Social Security Disability payments and gets her health care coverage through California’s Medicaid program. The rest of us in the family do our best to help.

I wanted to address this topic early in my series of newsletters because of my own experience, and because so many of my clients have loved ones with special needs. There is a fairly new and tax-friendly way of saving for these folks…and it doesn’t affect their eligibility for other forms of help like SSD as long as you follow the guidelines.

This savings vehicle is called an ABLE account; ABLE stands for “Achieving a Better Life Experience.” There is an online resource site called the ABLE National Resource Center where you can find more information about these accounts, which function a bit like 529 college savings plans. You contribute after-tax dollars, and some states allow state income tax deductions for contributions. The funds in the account grow tax-free, and as long as you use the proceeds for “qualified disability expenses” like education, housing, transportation, training, health care and so forth, the growth in the account isn’t taxed when you make withdrawals.

Here are some of the most important facts about ABLE accounts, but keep in mind that things are always changing and each state can be a little different:

• You can’t have more than $100k in the account or your loved one will lose eligibility for SSI/SSDI.
• When your loved one passes away, the state can take funds from this account to pay back any Medicaid benefits which were used. 
• There is currently a limit of $14k per year in contributions from all sources. This is unlike 529s where the $14k is just a per-contributor limit if you don’t want to pay gift tax. Multiple people could contribute $14k each to a 529, but not to an ABLE account.
• You can participate in any state’s program except for Florida’s, since Florida doesn’t allow out-of-state accounts. There are only three other states with active programs right now (NB, OH, and TN). 
• The minimum to open an account is $50 in NB and OH, and $25 in TN. 

The ABLE site has a handy program comparison tool to help you decide which state’s program is best for you. TN has relatively low fees and the widest range of investment options, so you might start there. But check out the comparison tool and see if there are other benefits you want; for example, OH is the only state offering a debit card to use with the account. 

Each of the programs allows you to roll over your ABLE account to another state’s ABLE program, so it’s fine to get started right away. You can always move the money if another state comes up with a better program. You will find links to each state’s program on the ABLE National Resource Center site. 

This is all great news, because now people with special needs don’t have to be kept in poverty just to qualify for benefits. And you don’t always have to set up trusts just to keep assets out of their hands.