A Financial Boost for Americans with Disabilities

By Katie Braun, Financial Advisor, Ameriprise Financial

Brookfield, Wis. - Saving for future expenses can be challenging. Saving for disability-related expenses adds another piece to the puzzle.

Many families with a disabled family member need to save for significant out-of-pocket expenses and build a decent balance, while continuing to qualify for access to government programs such as Social Security Disability Insurance (SSI).

Families facing this savings challenge may benefit from a new law enacted in late 2014: the ABLE (Achieving a Better Life Experience) Act. Designed to work much like a 529 college savings plan, the law allows an ABLE account to be funded on behalf of individuals with a physical or mental disability that occurred before age 26, regardless of their current age.

The individual also must meet one of two requirements. Either:
• Be receiving Social Security Disability Income benefits; or
• Have filed a disability certification with the IRS to demonstrate qualification.

A tax-advantaged savings opportunity

Families can set aside up to $14,000 per qualified person each year in an ABLE account. Money accumulated can be used to pay current and future expenses, so tax benefits can be extended over the life of the covered individual. Earnings grow tax deferred. Money used to meet qualified expenses for the benefit of that person can be withdrawn on a tax-free basis.

The term “qualified expenses” is broad in scope - health care costs, assistive technology, personal support services and housing are included. It also can apply to education-related expenses such as special education services and the costs of paying a tutor. Even legal fees, financial management services, funeral and burial expenses can be paid for from an ABLE account, using tax-free proceeds.

An asset protection strategy

Families have long faced the challenge of balancing their ability to save, while continuing to receive federal benefits through programs like Social Security Disability Insurance (SSI). Previous laws made it difficult to save significant sums for disability-related expenses without risking the loss of federal benefits.

Under the new law, as long as an ABLE account does not exceed $100,000 in value, full qualification for SSI benefits continues. If the account exceeds $100,000, those benefits may be suspended, but not terminated. Eligibility for SSI coverage is retained, and resumes once the balance of the account again falls below $100,000. The amount of assets held in an ABLE account does not impact eligibility for Medicaid coverage.

Discuss your options

While the ABLE Act was passed by Congress and is a federal law, implementation is managed on a state-by-state basis (similar to a 529 plan). Individual states may have different regulations regarding ABLE accounts when they begin to offer them. The ABLE account must be purchased from the state where the disabled person is a resident.
If the state of residency chooses not to offer an ABLE account, the state may contract with another state, and then that state program becomes one the disable person must use. There’s a lot to consider with this new law. Make sure you fully understand the rules of the road. Discuss your options with a financial advisor who can help you understand how the ABLE Act could apply to your situation.

Katie Braun is a Financial Advisor with Ameriprise Financial Services, Inc. in Brookfield, Wis. She specializes in fee-based financial planning and asset management strategies and has been in practice for 16 years. To contact her, please call (262) 785-1010, visit her office at 16650 W. Bluemound Road, Suite 800, or go to http://www.ameripriseadvisors.com/katie.braun/.

Ameriprise Financial and its representatives do not provide tax or legal advice. Consult your tax advisor or attorney regarding specific tax issues.

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