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A couple of years ago, we opened an ABLE account, which is a great way to save for future needs of our disabled child. ABLE accounts may also have the option to invest some of those savings, to help the money grow.
Like many parents of kids with disabilities, we worry about the future. Specifically, how we will provide for our disabled child when we get old and after we’re gone. The two main ways that people plan for their financial future is with a special needs trust, or with an ABLE account.
In the state where we live, it’s complex to open a special needs trust, and although it’s on “the list” of things to do, we have decided to forgo the $4,000 expenditure, and instead, open a free ABLE account. ABLE accounts are a more limited than a special needs trust, however, it does allow savings of $15,000 per year, up to $100,000 without impacting government benefits.
What is an ABLE account?
ABLE stands for Achieving a Better Life Experience, which refers to the federal Act that was passed in 2015. Because of that Act, states can establish tax-advantaged savings programs for people with disabilities. It allows individuals with disabilities to save money for qualified expenses without being taxed on the earnings. Some examples of qualified expenses include legal fees, adaptive equipment, housing, health, wellness, education, training and transportation.
Invest to Grow
One of the options on our ABLE account is to designate savings into an investment fund. There are a few different funds to choose from, some being more aggressive than others. This will allow savings to grow over time, tax free. There are several different funds to choose from, ranging from agressive to conservative – with good information for making the best investment decision for your family.
Roll College Savings
When my kids were born we began saving for college. Fast-forward to today, and we know that those college savings would better benefit our daughter with disabilities in an ABLE account. However, in order to use 529 college savings (without penalty), it needs to be used for education-related expenses.
With the ABLE Financial Planning Act passed by Congress in 2018, parents can roll a college 529 plan into an ABLE account without penalty.
It’s important to notify family about your ABLE account and its purpose. We explained to our family that they should not open any bank accounts in our daughter’s name. Although well-intentioned, they can disqualify her from receiving important state and federal benefits.
An ABLE account works much like a bank account, with an account and routing number, which makes it easy to set up automatic deposits. Additionally, through ABLEnow, there’s a option for family and friends to give a gift either online or by mail. There’s also cute, printable gift certificates!
Wait! I don’t need more paperwork
I hear you, special needs fam. We fill out more than our fair share of paperwork. The good news is that opening an ABLE account took me about 20 minutes. It really IS simple. Learn more about my experience opening an account HERE
How do I open one?
Do a quick Google search to find different ABLE account options. We used www.ablenow.com
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This is interesting. I’m surprised that the gov’t has done something so useful as allowing a 529 account to be rolled over into an able account. But I’m a little disappointed that those accounts top out at $100,000. I know many families would struggle to invest more money than that anyway, but if they could, they should be allowed to. $100K isn’t going to go very far if used for health care and/or housing.
I agree on the 100K max. I believe the special needs trust will allow you to exceed that but where I live, we’ll pay close to 4k just to open it…
Thank you for simplifying this information! I have had it explained to me by a lawyer friend and I was so completely overwhelmed. You have given me the confidence to try looking into setting an ABLE account up for my son again. You’re the best.
You are so welcome! I’m sorry I am just getting to your comment now – technical issues! We finally got around to working with an atty to set up an actual special needs trust, and found out that some of the cost was reimbursable under our state Medicaid waiver program, so that was a relief.
No worries, I totally get it. Life happens. Thanks for the tips ☺️