Understanding ABLE Accounts (529 A Savings Plans)

There are a variety of different assistance opportunities that many people don’t even know about! A hidden gem of assistance is the Achieving a Better Life Experience (ABLE) Act. This act was created back in 2014 as a way to help Americans who have disabilities. This can provide the opportunity to save thousands of dollars every year in a tax-deferred savings account (in fact it allows up to $16,000 in annual contributions!). These savings accounts can help people handle eligible disability expenses.

Understanding an ABLE Account

An ABLE account is also known as a 529 A account. These accounts can provide those with disabilities (and their families) an opportunity to save money. The money that is saved can go towards qualifying disability expenses of the accounts specified beneficiary. As of 2022 the limit for these accounts is up to $16,000 a year. However, contribution limits will vary based on the state! Anyone can contribute post-taxed funds to this account whether it be the account beneficiary, their family, their friends, etc.

The funds that get contributed are generally not tax deductible. However, it is important to note that some states may allow state income tax deductions. This account is regulated thanks to the Municipal Securities Rulemaking Board (MSRB).

How Do These Accounts Work by State?

States have their own set of regulation guidelines for ABLE accounts. You have the opportunity to open an ABLE account for any state. Previously, there was a rule stating that individuals could only open an ABLE account in their state of residency. However, this was removed back in 2015.

Luckily, there is a free online tool that can help you navigate through the different states. The ABLE National Resource Center has a state-by-state map of ABLE programs. When comparing states, you can see that there are some states that have some tax benefits and fees that others do not. That means comparing is key when choosing the right state for you!

Are There Fees for This Account?

States may choose to charge some fees for these types of accounts. Usually fees will consist of a monthly maintenance fee. However, they may also provide fee waivers for residents, those that have a certain account balance, etc.

Who is Eligible?

There are some eligibility requirements to this account since it is only for those with a disability. The beneficiary of an ABLE account must meet at least one of the following conditions:

  • Qualify for Supplemental Security Income (SSI) due to a disability or blindness that started before they were 26 years old
  • Be entitled to childhood disability benefits (CDB), disability insurance benefits (DIB), or disabled widow’s/widower’s benefits (DWB) due to a disability or blindness that started before they were 26 years old
  • Be someone that has certified that they have met the criteria for disability certification before they were 26 years old

Regardless of how you qualify, you will need to provide proof that you are eligible. The state that you choose for your ABLE account will be what determines which documentation you will need to provide. However, proof of disability will be needed no matter which state you choose. It’s also important to note that you may need to provide more than just proof of disability!

Can You Qualify if You are Older than 26 Years Old?

Yes! As long as you meet other eligibility requirements, your age doesn’t matter. Whether you are older or younger than 26 years old, you may be able to qualify.

What Disabilities Can Qualify for an ABLE Account?

If your disability results in severe limitations then you will likely be eligible for this type of account. The condition can be developmental, mental, physical, etc. You can review eligible disabilities in the Social Security Administration’s Blue Book (Parts A and B), and SSA’s List of Compassionate Allowances Conditions.

What Counts as Qualifying Disability Expenses?

These accounts are only able to help towards qualifying disability expenses (QDE). QDE are expenses that are meant to help the beneficiary of the account. Some expenses can include:

  • Assistive technology and related services
  • Basic living expenses
  • Education costs
  • Job training and support
  • Financial management and administrative services
  • Funeral and burial fees
  • Health costs
  • Housing expenses
  • Legal fees
  • Prevention and wellness costs
  • Transportation costs

How Can an Individual Benefit from This Account?

One of the most important parts of this account is that the first $100,000 that goes into this account is not considered a personal asset. Personal assets are important because they impact eligibility criteria for other programs like Supplemental Security Income (SSI), Medicaid, and housing assistance. These programs have limits that state that a recipient cannot have more than $2,000 in financial assets. This account allows those with a disability to have more than that $2,000 limit in this savings account.

Commonly Asked Questions

These accounts can lead to plenty of questions! That’s okay. These accounts can be confusing to learn about but don’t have to be. With a little bit of time and research, these accounts can be easy to understand!

Who is the Account Beneficiary?

Not everyone knows what the term beneficiary means. The beneficiary is the owner of the account that has a disability. The term “designated beneficiary” and “owner” can be used interchangeably. When you get more information about the ABLE account when comparing between states it is important to keep this in mind!

How Many ABLE Accounts Can You Open?

Even though you have the chance to choose the state you want to open up your account in, you can’t open more than one. You can only open one ABLE account regardless of the plan that you choose.

Can You Transfer Your Account?

Yes! You can transfer your account. However, your ABLE account can only be transferred to an eligible individual.

What is a Distribution from an ABLE Account?

When learning about ABLE accounts, you will likely come across the word “distribution”. Distribution is a payment that comes from an ABLE account. So the payments that you spend on qualifying disability expenses (QDE) are referred to as distributions.

What Happens to Your ABLE Account After You Pass Away?

No one likes thinking about passing away but it is important to be aware of how your account will be impacted once this happens. When the account’s beneficiary passes away, the funds in the account can still go towards any qualifying disability expenses like funeral and burial costs. Your individual state will have specific guidelines around how a beneficiary death will impact an account.

How Many Different Types of ABLE Accounts are There?

As of 2022, there are 49 ABLE accounts throughout the country that can help qualifying individuals.

Overall

An ABLE account is a tax-advantaged savings account that can help eligible account owners. You may be able to qualify if you meet at least one of the following conditions:

  • Qualify for Supplemental Security Income (SSI) due to a disability or blindness that started before they were 26 years old
  • Be entitled to childhood disability benefits (CDB), disability insurance benefits (DIB), or disabled widow’s/widower’s benefits (DWB) due to a disability or blindness that started before they were 26 years old
  • Be someone that has certified that they have met the criteria for disability certification before they were 26 years old

Each state will have its own version of an ABLE account so you will benefit from comparing options!

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