Incorporating an ABLE account into life care planning for a child with special needs can be a powerful tool to help families strive to ensure financial stability while preserving access to essential government benefits. ABLE accounts offer a flexible way to save for disability-related expenses, including housing, education, healthcare, and transportation, without jeopardizing the child's eligibility for programs like SSI and Medicaid.
A few key points about ABLE accounts that can be highlighted when advising special needs families:
- Tax Benefits: Contributions to ABLE accounts grow tax-free, and withdrawals used for qualified disability expenses are also tax-free, providing significant tax savings for the family.
- Maintaining Government Benefits: One of the primary advantages of an ABLE account is that funds in the account (up to $100,000) are not counted as assets when determining eligibility for SSI. Medicaid eligibility is not affected, regardless of the account balance.
- 529 Plan Rollovers: As you mentioned, families who have been saving in a 529 education savings plan for their special needs child can roll over funds into an ABLE account. This allows them to transition savings from education-focused accounts to ones that cover a broader range of disability-related needs. This flexibility may ease a parent's concern that they've been saving in a 529 account for one child and not for their special needs child.
- State Variability: ABLE accounts are state-administered, and while some states offer programs that accept non-residents, the specific terms, fees, and investment options may vary from state to state. It is important to compare state programs to find one that best suits the family's needs.
By incorporating ABLE accounts into a life care plan, families can save for the future in a way that complements other planning strategies, such as establishing a special needs trust. Balancing these approaches ensures that a child’s financial future is protected while maximizing resources for their care and quality of life.
If you or someone you care for would like further guidance on ABLE accounts or other special needs financial strategies, a free consultation with Gwen Canonico at Canonico Wealth Management could be a helpful next step.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. Investing involves risk including loss of principal. No strategy assures success or protects against loss. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.