ABLE (Achieving a Better Life Experience) accountsare available for any Illinois resident who developed a qualifying disability prior to their 26th birthday. Any person can contribute to that individual’s ABLE account as long as the total contributed funds are not more than $14,000 per year. ABLE accounts with less than $100,000 do not count toward the disabled individual’s personal liquid assets.
Without an ABLE account, a disabled individual must have less than $2,000 in liquid assets to receive Medicaid benefits. Beneficiaries are limited to one ABLE account at a time but can switch plans.
According to Kiplinger’s magazine, federal lawmakers passed The ABLE Act in 2014. It gave states the opportunity to create their own ABLE accounts. Illinois began ABLE accounts in 2015 that are administered by the Illinois State Treasurer. There is also an ABLE National Resource Center. A special needs trust attorney can help establish an ABLE account and provide more details on requirements.
ABLE accounts for disabled children
Known as 529A accounts, ABLE accounts function similar to the 529 accounts used to fund college education. Parents can use funds from ABLE accounts for disability-related expenses like medical care, transportation, education, job training, etc. The annual contributions to ABLE accounts are not tax-deductible, but withdrawals for qualified expenses are tax-free. Contributions within the $14,000 annual cap are not subject to gift taxes.
ABLE accounts to save for the future
The National Disability Institute estimates that approximately 5.8 million individuals in the United States qualify for ABLE accounts. Illinois is one of 31 states that have passed ABLE legislation so far. Prior to ABLE, a Special Needs Trust was the most common method parents used to save money for their disabled children. While there are some tax advantages to ABLE accounts, there is no limit on the amount of money that can be placed in a Special Needs Trust. Families doing long-term financial planning for a disabled loved one should consult with a special needs trust attorney on which account is the best options for their situation.
Additional information about ABLE accounts
There is some ambiguity to “disability-related expenses” as the term relates to ABLE accounts. Different individuals have unique needs. Also, the federal ABLE Act does not limit the amount of money an ABLE account can have in it. States set their own ceiling. An Illinois special needs trust attorney has the latest information on ABLE account legislation and state regulations.