If you have a loved one with disabilities, or you’re disabled yourself, you know that most of the same rules when it comes to saving, investing, and financial planning don’t necessarily apply to disabled individuals. You’ve got waiver programs that you have to apply for way in advance, and if you’re relying on government assistance, you’ve got things like income requirements and asset caps that you can’t go over if you want to stay eligible for those types of benefits. So not only is it difficult to live with, it’s also very difficult to try and plan for and plan around trying to find the resources and then staying qualified for those resources.
One of the big things that has come along recently that tries to help out with some of this is called an ABLE account. An ABLE account works very similar to a 529 plan (the way you use 529 plans to save for college), an ABLE account is a way to save for disabled individuals while keeping a lot of the same protections in place. You do have to qualify, they want ‘eligible individuals’ (which most people who are on SSI or SSDI meet those requirements) and then they want you to use any distributions from the ABLE account on ‘qualifying expenses.’ Just like they want a 529 plan to go toward educational expenses, from an ABLE account they want your distributions to go to ‘qualifying expenses.’ The good news is those qualifying expenses are pretty broad, it includes things like education, housing, transportation, career development, or training. It can also go for things like funeral and burial expenses as well, so it’s pretty broad on what is considered qualifying expenses.
The way this works is you can contribute up to $15,000 a year and there is no requirement on who can contribute. So, it can be parents, it can be friends, it can be relatives – anybody can contribute – but the yearly cap is $15,000. Then, once those funds are saved into the ABLE account, they are able to grow tax-deferred and if they’re used for those ‘qualifying expenses’, they get to come out tax-free.
Another big benefit is an ABLE account does not disqualify you from meeting the investment threshold that is in place for Medicaid – there’s currently a $2,000 cap on what you can hold yourself before disqualifying from Medicaid. An ABLE account does not count towards that $2,000 cap, but it does bump you out of SSI once an ABLE account gets over $100,000. So you have some wiggle room there on saving and you want to watch out on that limit if you’re trying not to disqualify yourself. Either way, it gives you an opportunity to save and have that savings grow tax-deferred and come out tax-free while also not disqualifying yourself from some of the benefits that you had to try work hard or wait a long time to qualify for!
If you need help navigating some of the things that we’ve talked about – trying to figure out what waivers to get onto or trying to figure out how to set up an ABLE account, we’d love to help you out here at Next Step, as we know there are a lot of things when it comes to disabilities to try and look out for and unfortunately there’s not a lot of resources out there. We’d love to try and help you and be that resource for you, just give us a call here and we’d love to walk you through that. Y’all have a good one!