[Nfbc-info] FYI FW: How New ABLE Accounts Will Help Americans With Disabilities
mike at michaelhingson.com
Sat Mar 7 01:40:49 UTC 2015
From: Xavier, Joe at DOR [mailto:Joe.Xavier at dor.ca.gov]
Sent: Friday, March 06, 2015 4:55 PM
To: Xavier, Joe at DOR
Subject: How New ABLE Accounts Will Help Americans With Disabilities
>From US News:
How New ABLE Accounts Will Help Americans With Disabilities
Modeled after 529 college savings accounts, ABLE will offer tax advantages
for people with disabilities.
ABLE accounts will allow families to set aside $14,000 per person every
By Susan Johnston March 3, 2015
Americans with disabilities and their families often face a myriad of
financial challenges, but they will soon have a new financial vehicle
allowing them to save for expenses and enjoy tax-free growth similar to 529
college savings accounts. Congress passed the Achieving a Better Life
Experience Act on the final hour of the final day of Congress in December,
creating a new type of tax-advantaged account called an ABLE account or a
The hope is that ABLE accounts will help level the financial playing field
for families raising kids with disabilities. The National Down Syndrome
Society estimates that the accounts will benefit roughly 5.8 million
individuals and families.
"As a country, we've basically said that we value saving for higher
education using a 529 plan, but we don't value saving for the basic needs
that are connected to a disability," says Sen. Bob Casey, D-Pa., who
sponsored the Senate version of the bill. "We have this bizarre and really
insulting situation where a child with a disability, his or her family
couldn't save for his or her future [in a tax-advantaged account], but they
could save for his or her brother or sister because they were going to
Like 529 college savings accounts, ABLE accounts allow families to set aside
money (up to $14,000 per person annually), and pay no taxes on that money's
growth as long as it's used for qualified expenses. For a 529 college
account, qualified educational expenses include college tuition, fees and
The beneficiaries of an ABLE account may have more diverse needs, so those
accounts allow for a broader list of qualified expenses, including special
education services and tutoring, health care costs, assistive technology and
housing. "[ABLE accounts] are tailored for different purposes because it
covers the support, the housing, legal fees and even funeral and burial
expenses," says Dave McKelvey, a tax and business consulting partner at New
York accounting firm Friedman LLP.
Assets in both types of 529 accounts are generally protected in bankruptcy,
as long as contributions were made at least two years before a bankruptcy
(meaning relatives can't shield assets by transferring them to a 529 just
before declaring bankruptcy). "If the parents declare bankruptcy, the money
would still be there for the child," McKelvey says.
Similar to the college savings accounts they are modeled after, ABLE
accounts will be offered by states - although the Department of the Treasury
and IRS are also involved. Based on the strong bipartisan support the ABLE
Act received, Casey predicts that states will start offering accounts later
"The states are all individually, as we speak, putting together legislation
for how ABLE accounts will be administered," says Peg Creonte, senior vice
president of Ascensus College Savings, which helps states administer 529
college savings plans. "We're still really in a waiting mode."
The original 529 accounts allow students to have multiple 529 accounts in
their name (for instance, if grandparents opened one and parents opened
another) and choose a plan from any state regardless of where they live.
Those with an ABLE account must open an account with their home state, and
they can only have one account in their name. To qualify, the beneficiary
must have been blind or disabled before age 26 and meet other criteria for
documenting a severe disability.
In the past, individuals with disabilities could not have more than $2,000
in assets to qualify for benefits like Medicaid and Supplemental Security
Income. However, beneficiaries of ABLE accounts can save up to $100,000 in
the plan without losing those benefits (once the account balance exceeds
that threshold, it would impact SSI benefits).
McKevley says that with the annual contribution limits of $14,000 and an
overall asset cap of $100,000, ABLE accounts will likely help middle- to
upper middle-class parents who may not have the resources to fund a special
needs trust during their lifetime.
Casey hopes that ABLE accounts will help give families of children with
disabilities more peace of mind. "When that 7-year-old with Down's syndrome
becomes a 25- or 30-year-old in the workforce, parents are always worried
because they are used to being present and able to help their daughter in
all kinds of ways," he says. "Now at least there'll be an account that she
can contribute to over time. It doesn't solve all problems, obviously, but
it does give a measure of security to the individual and the family."
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