Families and financial planners alike know how difficult it is to plan accordingly for a stable financial future for special needs children. Being sure that they will be taken care of once they leave the house or once you are gone can never be a completely sure thing. But the ABLE Act, passed in 2014, expands upon Section 529 of the Internal Revenue Code (commonly known for saving tax-free money for college) to include a tax-free savings account for special needs families and people with disabilities.
Knowing all the facts about the ABLE Act, or the Achieving a Better Life Experience Act, will allow you to become acquainted with the positives and negatives before deciding if it is right for your family. The Act gives parents the opportunity to leave their child with the means to have a better life in their absence, but without careful research and planning, this fund may limit other helpful government programs the disabled individual may need in the future.
The ABLE Act allows for $100,000 in tax-free savings account for a disabled individual. This money can be used for housing, education, transportation, and other necessary expenses. At $100,000 or less, these funds will not count towards programs like Medicaid and Supplemental Security Income. Families with a lot of wealth, using trusts and life insurance to pay into this account, could potentially squander the disabled individual’s chance for other government issued programs. Also, another limiting factor is the individual’s age; documentation of the disability must occur before the person is 26 years old.
All in all, the ABLE Act is a positive program for the special needs community, giving them a chance on having a normal and better life than they would have supporting themselves. With careful planning, they could have access to every opportunity they would need to have a fulfilling life. But without planning, a special needs family with substantial assets could underscore other opportunities the child may be presented. Consult a Certified Financial Planner for more details and to create a plan that benefits both the child and the family before acting on the account.
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