When our kids were young, my husband and I were able to save money for our typical children by contributing to a college savings plan, where the money could grow tax free, but we weren’t able to do that for Billy, who really needed it the most.
That changed in 2015 with the introduction of ABLE accounts, which allow money for disabled people to grow tax free and not be counted when it comes to determining eligibility for government services.
Each individual may only have one ABLE account, and only $15,000 per year can be deposited into an ABLE account per beneficiary, regardless of the number of donors. The account value, up to $100,000, will be disregarded in determining eligibility for Supplemental Security Income (“SSI”) and MassHealth. In other words, a person can have up to $100,000 in an ABLE Account and still be considered to have less than $2000 in assets, thereby qualifying for SSI and MassHealth. Funds can be used to pay for education, health care, transportation, housing and other expenses.
ABLE accounts allow parents and grandparents of children with special needs to save money for them, tax free, similar to a 529 Account for college savings for typical children. This is wonderful benefit for parents of young children, who can now save for their special needs child the same way they can save for their typical children. Even more importantly, disabled adults can have access to cash from the accounts without interfering with their SSI benefits. Ordinarily, any cash above $20 that an SSI beneficiary receives in a month reduces his or her monthly SSI payment, dollar for dollar. Cash distributed from an ABLE account is not counted by SSI.
Another exciting use of an ABLE account is that trustees of special needs trusts can used them as a pass-through, to get disposable income (i.e. cash) to their beneficiaries. Trustees can periodically distribute trust money to an ABLE account, and the beneficiary can take money out of the account with the account’s debit card.
ABLE accounts are currently limited to individuals with disabilities that originated before the age of 26. One caveat to the accounts is that remaining in the accounts after an account holder dies will be used to reimburse MassHealth for the money MassHealth has spent on them.
To learn more, or to open an ABLE account in Massachusetts, click here.https://www.fidelity.com/able/attainable/overview