Unless you’ve visited a financial planner, you probably wouldn’t know there are special savings plans aimed at helping the disabled. These accounts, called ABLE accounts, officially started in 2016 to create tax-free savings accounts for people with disabilities. The accounts allow individuals to save up to $ 14,000 annually without affecting other disability benefits. Whether it is opened by the disabled person or a close relative, these specific types of plans provide advantages not only to the disabled person, but also to the family members.
When it comes to financial planning mankato mn experts point out that this savings plan for the disable is really tax-friendly because earnings are tax-free, and the money can be used for a variety of necessary expenses. The plans are structured like a 529 college savings plan. Anyone can establish the account for eligible beneficiary and contributions are after-tax.
Qualifying for An Account
A beneficiary of the account must have a disability that has been present before they turned 26 years old. The governments definition for disability is “marked and severe” functional limitations. People who meet this disability definition, like autism, or down syndrome will qualify. Also, many people who’ve met the standard for Supplemental Security Income (SSI) will qualify.
Expenses That Qualify
These types of accounts have a broader range than your typical college savings plans. This is because people with disabilities have varied needs. The money can be used for assistive technology expenses, transportation, or specialized housing. While they mimic the college savings plans, these disability plans have more freedom because the disability is a lifetime issue.
Working with Other Disability Benefits
These assets in a disability don’t usually count when determining eligibility for other programs, except when you have more than $100,000 in the disability account. Then this can have an impact on SSI, thus it’s important to meet with a financial planner to sought out the guidelines. An expert can help develop a plan to provide for disability-related expenses without negatively impacting the security of other disability programs.
Planning for Disabled Adults
Most parents worry how to ensure their disabled child will be taken care of as they age. Many of these questions naturally surround financial issues, and financial planners say that hammering out a plan can diminish the anxiety.
Other than taking advantage of special plans, like the tax-free savings plan for the disabled, financial planners say to create a trust for special needs. The special needs trust is a vital part of any long-term financial plan. Here you can place the money you save, the money that other people give to your child or what you receive through an insurance agreement without worrying that these funds may interfere with your child’s eligibility to receive federal benefits.
Additionally, everyone should create a will. A will specifies what will be done with your assets after your death. By writing a will, you make sure your assets are turned over to a special needs trust and not your child. Without a will, a probate judge could name your child as a beneficiary and this could make him or her ineligible for federal benefits. Planning for the future, especially with a disabled child can be overwhelming, but it must be done. Before making any lifelong decisions, consult with a financial planner to ensure you and your family take the most advantageous route.