An Introduction to ABLE Accounts for Florida Parents of Children with Special Needs
Enacted in 2014, the Achieving a Better Life Experience (ABLE) Act provides important benefits to families that have children with special needs. Under the ABLE Act, families can set aside money to provide for their children without jeopardizing their children’s eligibility for Supplemental Security Income (SSI), Medicaid, and other government benefits. If you have a child with special needs and you are not currently taking advantage of the benefits of the ABLE Act, we recommend that you speak with an attorney about incorporating an “ABLE account” into your life plan.
What is an ABLE Account?
Establishing an ABLE account allows parents to save for their children’s long-term financial needs while realizing tax savings and preserving their children’s government benefit eligibility. If you are familiar with 529 college savings plans, ABLE accounts work in much the same way (in fact, the ABLE Act amends Section 529 of the Internal Revenue Code).
When you establish an ABLE account, the money you deposit into the account grows tax-free. For Florida families, the funds in the account are invested through ABLE United, and the investment gains are not taxed—as long as the funds in the account are used for qualifying expenses such as housing, health care, transportation, employment support, assistive technology, and other disability-related needs.
Similar to a 529 college savings plan, if funds are withdrawn from an ABLE account and used for non-qualifying expenses, then the withdrawals are subject to tax and a 10 percent penalty. As a result, planning is important, and parents should ensure that they have a clear understanding of when and how funds in an ABLE account can be used.
Can Anyone Establish an ABLE Account?
The ABLE Act is intended to assist families of children with special needs. However, funds placed into an ABLE account can be used to meet a child’s needs into adulthood. The only major restriction on establishing an ABLE account is that the beneficiary’s (i.e. your child’s) disability must have developed before his or her 26th birthday.
Are There Limitations on Financial Contributions to ABLE Accounts?
Yes, there are limitations on families’ financial contributions to ABLE accounts. Generally, contributions are capped at $15,000 per year (although beneficiaries who work can make contributions above this limit in some cases). Additionally, while there is no upper limit on the value of an ABLE account, if the value exceeds $100,000, then the beneficiary’s eligibility for SSI benefits will be suspended until the value drops back below the $100,000 threshold.
ABLE accounts have certain other limitations as well; and, as a result, they are not right for all families of children with special needs. But, they do provide important benefits to many families, and it is worth considering your options if you haven’t done so already. To learn more, schedule an appointment with Jacksonville, FL life planning attorney Mark F. Moss today.
If you would like to speak with Jacksonville, FL life planning attorney Mark F. Moss about whether an ABLE account is right for your family, please contact us to arrange a confidential initial consultation. To schedule an appointment at your convenience, please call 904-329-7242.