Sometimes the government gets things right.
Recently, federal legislation has created a new investment vehicle called ‘ABLE Accounts’ (Achieving a Better Life Experience) to help families save for future expenses related the needs of a loved one with a long-term disability. For the first time, eligible individuals will be allowed to establish savings accounts that do not affect the beneficiary’s eligibility for SSI, Medicaid and other public benefits. ABLE accounts help families to plan for, save and fund disability-related expenses on behalf of their loved ones with disabilities in order to supplement private insurance, Medicaid, and SSI.
ABLE accounts will allow people with disabilities to save up to $100,000 without losing government benefits. The beneficiary of an ABLE account must meet the definitions of disability or blindness under the Social Security Disability Insurance program and the disability must have occurred before the age of 26. The first $100,000 deposited in ABLE accounts will be exempted from the SSI $2,000 individual resource limit. If the account balance exceeds $100,000, the beneficiary’s SSI benefits will be suspended but not terminated. Tennessee’s plan currently allows for maximum contributions of $350,000.
Contributions to ABLE accounts, like Section 529 Plans, must be made using after-tax funds, but will enjoy the benefits of tax-free growth and tax-free withdrawals for qualified disability expenses. Qualified disability expenses include education, housing, transportation, job training, assistive technology, health and preventative care, wellness programs, legal fees, and other expenses which help improve health, independence, and/or quality of life.
While federal legislation has been approved to provide a template for state regulated ABLE Accounts, some states have been slow to adopt their own plans. Fortunately for many of our clients, Tennessee has already begun inviting eligible individuals nationwide to open an ABLE Account regardless of their state of residence. This may be an extremely effective tool to help families to plan for the long term needs of their loved ones. Anyone can contribute to an individual’s ABLE TN Account. Account owners, family and friends may contribute a total of $14,000 each year. No sales or distribution charges or fixed account maintenance fees associated with ABLE TN accounts. Visit www.abletn.gov or contact your financial professional to learn more.
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