EnABLEing Financial Security for your SynGAP-ian – Setting up a 529 ABLE Savings Plan!

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Caroline is a Syngap mom to 8 year old Yonas and also helps manage the SRF Blog. She is excited to have the chance to contribute to the SRF Long-Term Planning Series (while educating herself about this important topic!).

While I consider myself a fairly resourceful individual for whom “googling” information about pretty much anything is second nature, I have somehow struggled to wrap my head around the importance and the rationale of setting up an ABLE account for my 8-year-old son, Yonas. I should mention that we live in NY state – an incredibly giving part of the country – we are so lucky. Yonas qualifies for all kinds of government programs including the Medicaid Waiver program, Self-Direction (which includes 45 hours of respite services per week) and private schooling paid by our school district. Lastly, we are also fortunate enough to have jobs that afford our family private health insurance which covers all of Yonas’ medical appointments and private ABA therapy for after school. 

The reason Yonas’ benefits and access to support is important to mention here is because it is the very reason I have struggled to understand why an ABLE account would even be necessary for him. For quite some time, we were asking ourselves: “Why do we need to set up an ABLE account and allocate funds towards it when Yonas is enrolled and eligible for all kinds of public and governmental programs that will take care of him throughout his life?”

Luckily, I had the chance to connect with Summer, another Syngap parent, and she was able to shed light on the need for an ABLE account a bit more. She explained that she envisions her son, Ryker, using the ABLE funds to pay for things like clothes, groceries, hobbies, health and wellness, transportation and anything else that will optimize his happiness and everyday living. 

Riiiiiiight, the everyday stuff, I realized. What an “aha” moment that was for me. My husband and I hadn’t even thought of that. We are always so busy thinking “big picture” that we were unintentionally avoiding more concrete thinking about our son’s future. It’s also just so hard to think about long-term planning when the immediate needs are so overwhelming and intense at times. Summer has a great analogy that helps explain what the ABLE funds are. She says, the ABLE account is almost like the child’s debit card (when (s)he is old enough to use it) especially for things that will not be covered by the waiver programs or any other government-level or public support.

Since Yonas will most likely live under our close watch when he is an adult (maybe even with us in our home), we will always need to provide him with some sort of “allowance” or at least have some cash put aside that will be used to invest in his basic and everyday living needs. I also realized through my conversation with Summer that unlike my other kids, Yonas’ developmental trajectory will (most likely) not include a transition to getting a job toward the end of being financially independent someday – seems obvious, but again, just not something we had consciously taken the time to think about.

So in conclusion, why not begin saving up money in a 529 ABLE Savings account while growing those assets tax free? Read more below to find out the details!

What makes the ABLE account unique and desirable?

The Achieving a Better Life Experience (ABLE) Act of 2014 allows states to create tax-advantaged savings programs for eligible people with disabilities (designated beneficiaries). Funds from these 529A ABLE accounts can help designated beneficiaries pay for qualified disability expenses. Distributions are tax-free if used for qualified disability expenses, per the IRS.

Many families who have children with disabilities rely on a variety of different public (and governmental) programs and benefits including SSI, Medicaid waiver programs and SNAP. Eligibility for these programs, however, is based on certain income requirements and limits and can be withdrawn if an individual owns assets above those income limits. An ABLE account allows individuals with a disability to save and invest money without losing those federal benefits — as long as the total balance does not exceed $100,000.

How is ABLE eligibility determined?

The ABLE Act limits eligibility to individuals with disabilities with an age of onset of disability before turning 26 years of age.

What can ABLE funds be used for?

This varies slightly by State and you should check the rules in the state you sign up in, but generally speaking:

  • Education
  • Housing (including utilities and mortgage payments for guardians if the child lives at home)
  • Transportation
  • Employment training and support
  • Assistive technology
  • Personal support services
  • Health
  • Prevention and wellness
  • Financial management
  • Administrative services
  • Legal fees
  • Expenses for oversight and monitoring
  • Funeral and burial expenses

Do the funds in the ABLE account grow? 

Yes, Earnings on the account grow tax free as long as the funds are used for Qualified Disability Expenses.

Are  limitations or restrictions on the ABLE account?

The total annual contributions by all participating individuals, including family and friends, for a single tax year is $15,000.

Can ABLE funds be moved to another 529 plan (college savings account)?

Yes, as of 2018 Congress passed the ABLE Financial Planning Act which allows you to rollover money from a 529 College Savings account into a beneficiary’s (or family member’s) ABLE account without being penalized and vice versa. There is a $15,000 rollover limit (less the current tax-year ABLE contributions).

What is the difference between an ABLE account and a Special Needs trust?

The regulations governing SNTs and ABLE accounts are quite different – individuals with disabilities and their families should consider their specific circumstances before establishing one or the other. In some instances, it may be beneficial to create both.

Some of the main difference between the two are listed below:

Eligibility

ABLE The Act limits eligibility to an individual whose disability onset occurred prior to the age of 26

SNT First party SNTs, which are funded with assets belonging to the beneficiary, must be established before an individual meeting Social Security’s disability criteria reaches the age of 65

Establishment & Management

ABLE accounts can be created and managed by the beneficiary, subject to capacity. If they need assistance, the account can be established and/or managed by their parents, conservator/guardian or agent under a power of attorney.

SNT A first party SNT may be established by the beneficiary, their parents, grandparents, conservator/guardian or the court. A third party SNT may be established by anyone except the beneficiary. Management of SNTs is handled by a designated trustee.

Contribution Limits

ABLE Total annual contributions are pegged at $15,000 at the moment

SNT There are no limits to how many SNTs an individual may have or to how much each trust may hold. 

Spending Restrictions

ABLE An ABLE account may pay for the beneficiary’s “qualified disability expenses” (QDEs) to maintain or improve the health, independence, or quality of life of the beneficiary. This includes basic living expenses, education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services. The ability to pay for housing without affecting SSI is an attractive benefit of ABLE accounts. 

SNT, at the trustee’s discretion, may pay for anything that benefits the beneficiary alone─ other than food and housing─ without affecting government benefits.

How do I get started setting up an ABLE account?

Decide which State you will open the account in and set it up online.  This site – ABLENRC.org/compare-states/  allows you to compare different state programs and then click through to learn more about any given program and open an account.

HAPPY PLANNING EVERYONE!