A New Tool for Saving: ABLE Accounts

Many people who receive federal benefits for disability have a challenge with being able to save due to asset restrictions. While you may want to put away some funds for a possible health emergency, the rules for programs like Social Security Disability (SSD) say you can’t go above a certain limit for income or holding assets in savings. This can really thwart better planning for people with chronic conditions like rheumatoid arthritis.

I learned recently about a new option that can help with this problem. Unfortunately, it is restricted to people who acquired their disability before age 26; but, it may be helpful to those diagnosed with juvenile idiopathic arthritis and their families.

Introducing the ABLE account

The ABLE account was established in a law passed in 2014 to allow people with disabilities acquired before age 26 to save in a special tax-free account without concerns about disrupting federal benefits. Family members and loved ones can also contribute to such an account in support of the eligible person.

Accounts can be held by an eligible person (and managed with help of a parent or guardian) who is entitled to benefits based on a disability or with the support of a qualifying diagnosis from a physician. Juvenile idiopathic/rheumatoid arthritis can be a qualifying diagnosis if the onset of the illness was before age 26.

Options for an ABLE account

While the ABLE account was created by federal law, each state has a program. However, you don’t have to be a state resident. You can choose any state or qualifying bank to open an ABLE account. Even Fidelity provides ABLE account information and options.

Limitations and qualified expenses

ABLE accounts are tax-free, but there are some limitations. Different banks may operate them slightly differently, but overall, the rules are that a maximum of $15,000 per year may be contributed. If the account holder is working, an additional amount may be contributed; but, this may vary by state. The first $100,000 in the account is sheltered from the Social Security Insurance resource limit. An overall account limit is set, usually around $500,000, but this may also vary by state. Additionally, an individual can only have one open ABLE account.

When can I withdraw from the account?

Funds from an ABLE account can be withdrawn at any time, but taxes must be paid unless it is a qualified disability expense. However, this definition is very broad to help assist the individual with expenses for education, food, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management, administrative services and other costs that support health, independence, or quality of life. It is important that records are kept about how the money is used and showing that withdrawals go towards qualified expenses.

Depending on the state or financial institution, different fees and return rates are available. The National Resource Center on the ABLE Act provides more details and information, including viewing options by state for the accounts.

A new savings tool for people with disabilities

While the option was created by law in 2014, it took some time for the Internal Revenue Service to develop the ABLE account rules and regulations and then the states had to do the same.

It also hasn’t been terribly well-publicized, as I bumped into this discovery by accident. But, I am eager to spread the word, as this can help individuals and their families save for the future to help cushion from the financial costs that may come with a chronic illness like JIA.

Hopefully someday in the future, this program can be expanded for others with significant disabilities and folks with adult-onset rheumatoid arthritis. But in the meantime, I hope this information assists those with JIA and their concerned loved ones.

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