TEXAS ABLE ACT: HOW TO SAVE FOR DISABILITY COSTS
An ABLE Account is a new way for people with special needs to supplement and preserve their government benefits without or in addition to creating a Special Needs Trust or opening an account with the ARC of Texas Master Pooled Trust.
ABLE (“A Better Life Experience”) Accounts are governed by a new subsection to Section 529 of the Internal Revenue Code, the section permitting tax-free college savings and investment accounts. Investments grow tax-free and withdrawals for qualified disability expenses are tax-free. In Texas, they will be overseen by the same government agency and have the same reporting requirements as a 529 college savings or investment accounts.
More information is available at the ABLE Accounts National Resource Center: www.ablenrc.org/select-a-state-program. Information on creating Texan accounts can be found at texasable.org. Texans can also use Ohio ABLE accounts www.stableaccount.com. An ABLE account beneficiary does not need to be a resident of the state managing the account.
But money in an ABLE Account can be used for much more than college. It can be used for primary, secondary or post-secondary education. It can be used to pay qualified disability expenses related to housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, and expenses for oversight and monitoring, funeral and burial expenses.
The person with special needs and that person’s relatives and anyone else who likes can contribute an annual total of up to $15,000 per year to an ABLE Account.
An ABLE Account can hold $100,000 at any one time without affecting eligibility for SSI (Supplemental Security Income.) This effectively raises the asset cap from $2,000 ($3,000 for a married person) to $100,000. SSI payments are suspended (not permanently canceled) if an ABLE Account holds more than $100,000. Medicaid eligibility is not affected.
If a person is no longer disabled, the ABLE Account can be rolled over into a 529 college savings or investment account for that person or to an ABLE Account or 529 college savings or investment account for a family member.
Texans can also use ABLE accounts established in the State of Ohio. These can be linked to a TrueLink Financial debit card which can restrict where the card can be used and provide online reports of its use. www.stableaccount.com
ABLE Accounts are commonly used when the amounts are small or when funds need to be used for food and shelter (which cannot be paid by a special needs trust), preserving the full Supplemental Security Income benefit to pay for other expenses.
It’s never too early to plan for your future.