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The Benefits of an ABLE Account

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This article is a part of True Link’s Guest Expert Series. We have interviewed leaders knowledgeable in disability planning, elder law, and trust administration and will be sharing their expertise with you in a series of videos and posts. Note: this article is not intended to provide investment, legal, tax, accounting or medical advice. Before making decisions involving investing, legal, tax, accounting or medical concerns, you should consult appropriate professionals regarding your specific situation.

As the parent or loved one of a person with disabilities, you may have heard of ABLE Accounts which were introduced in 2014 with the passage of the Achieving a Better Life Experience (ABLE) Act. This legislation allowed states to create tax-advantaged savings programs for eligible people with disabilities. Currently, eligibility is limited to individuals who experienced the onset of their disability prior to age 26, although legislation has been introduced (and is expected to pass in late 2022) to increase this to age 46. 

According to the ABLE National Resource Center, the ABLE Act, “aims to ease financial strains faced by individuals with disabilities [...without] negatively impact[ing] the person’s eligibility for public benefits, such as Medicaid.” But what exactly does this mean in practice? In this post we’ll walk through some of the key benefits of an ABLE Account.  

Pay for housing, food, and other qualified disability expenses 

If you’re familiar with Special Needs Trusts (SNTs), you may know that when distributions are used for food or housing expenditures, the Social Security Administration (SSA) may reduce the beneficiary’s Supplemental Security Income (SSI) for in-kind support and maintenance benefits. One of the benefits of ABLE Accounts is that this is not the case. Food is considered a Qualified Disability Expense (“QDE”) in the POMS (SSA's POMS are the guidelines for SSI) and many housing expenses can be paid for with an ABLE Account. 

Special Needs Attorney Roy Froemming shares, “If you can run money through an ABLE account for [the beneficiary’s] benefit then that money does not count as their income when you put it in and it does not count as their income when it comes out. They just need to be paying their shelter expenses the same month they get the money out of the ABLE account.”

Of note, assets within an ABLE account also do not count as a resource for a beneficiary receiving SSI (subject to a total ABLE account balance of $100,000). And people with disabilities do not have to choose between an SNT and an ABLE Account; many beneficiaries with ABLE Accounts also have an SNT.  

Ability to earn and save money from a job 

“There’s a misnomer that if you’re on benefits, you can’t work,” shared Tom Foley, the Executive Director of the National Disability Institute; “benefits can make it a little more difficult, but [...] Social Security wants people with disabilities to work.”

In addition to the Social Security Administration’s work incentives that help enable and encourage employment, ABLE Accounts can make it easier to earn and save without compromising public benefits. As Foley explains, “People with disabilities have been told forever that because of asset limits they can’t save for their futures. But thanks to ABLE Accounts [...] people whose disability onset was before the age of 26 are able to save in special ABLE accounts. You can save hundreds of thousands of dollars… and still hold onto that important Medicaid coverage for healthcare and in-home support services”

Financial independence and aspirations

Perhaps one of the most meaningful benefits of an ABLE Account is increased financial freedom and ability to plan and save for the future. “ABLE Accounts allow you to really think about long-term economic goals and how you can achieve them,” emphasizes Foley, ““You can start to dream about what it is you want to achieve[...]. Maybe it’s employment. Maybe it’s an accessible van. Maybe it’s even home ownership.”

Beneficiary wellbeing can also be enhanced because of the spending flexibility of ABLE Account funds. The combination of fewer spending restrictions, plus the ability to make purchases for themselves can allow people to have more financial autonomy than they’ve had before. Several state-run ABLE Account programs work with True Link to provide additional tools that help promote independence of account holders. 

For more information about ABLE Accounts, click here to visit the ABLE National Resource Center’s website. 

Want to watch these videos on Vimeo? Here are the links to the guest expert videos related to this topic:

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