In 2014, the Federal Government passed the Achieving a Better Life Experience Act (ABLE). This new law was actually an extension of the 529 college savings laws. It allowed money to be held for a disabled child’s use without adversely affecting eligibility for some of the benefits available to these children and young adults under Social Security and Medicaid.
ABLE accounts involve some of the same tax benefits as 529 college savings plans. They were designed to provide families of disabled children a tool to help them prepare financially for their loved one’s eventual independence and future lifestyle needs.
After Congress passed the ABLE law, each state then had to adopt its own rules to implement its own ABLE account program. To be frank, this process has been frustratingly slow.
Last year however, the state of Ohio released the first ABLE account in the nation and now, just recently Indiana has made its program, INvestAble available to the public.
ABLE accounts definitely help address some of the financial challenges faced by families of loved ones with a disability. Every parent of a child with special needs worries about what would happen to their child if they were gone. With the ABLE account, funds can be accumulated on tax and legally preferred basis specifically to provide for the child’s care and needs. ABLE accounts can also be used as a funding source for moving young adults dealing with disabilities toward greater independence.
ABLE accounts do have some limitations. Disabled individuals must maintain only one account and contributions to the plan are limited to $14,000 annually. Plan balances above $100,000 will impact some government benefits and withdrawals are limited to qualified expenses.
As a planner, I am viewing ABLE accounts as more of an operational financial tool. I appreciate the flexibility and ease of management, but I also believe most families will still want to explore setting up some of the more advanced planning we've discussed in this column before.
I recently opened an Indiana INvestAble account for my son Ethan using the INvestAble website. I found the process to be straightforward. The set-up does require the account owner’s (minor child) social security number, so make sure you have that on hand. One of the nicest functions of the INvestAble web platform is the ability to provide a gift code to family members so they can also contribute to the plan as well for events like birthdays and graduations.
Unfortunately most states are not including the ability to add a professional advisor to an ABLE account, but with some of technicalities of eligibility and especially distributions this may change over time.
I am excited about this new tool I am happy to discuss how my family is using this program so please feel free to reach out.
Opinions are solely the writer's. Marc Ruiz is a wealth adviser with Oak Partners and a registered representative of Sll investments, member FINRA/SIPC. Oak Partners and Sll are separate companies. Contact Marc at marc.ruiz@oakpartners.com.
