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Help for Disabled Persons – ABLE Accounts

Recently, Indiana has decided to offer ABLE Accounts to disabled individuals and their families. ABLE stands for Achieving a Better Life Experience. ABLE Accounts create tax-free savings accounts for individuals with disabilities. The goal of these accounts is to ease the financial strains faced by individuals with disabilities and their families. These accounts supplement, rather than replace, the benefits someone may already be receiving, such as through private insurance, Medicaid, or other sources.

Who is eligible for an ABLE Account?

Minors or adults who are blind or have been diagnosed with a severe physical or mental disability before age 26. The individuals must also be entitled to Supplemental Security Income (SSI) through the Social Security Administration.

What can an ABLE Account be used for?

An ABLE Account can be used to cover a variety of qualified essential expenses. The IRS defines qualified expenses as expenses that relate to the beneficiary’s disability and help to maintain or improve health, independence, and quality of life. These include such things as medical and dental care, education, community bases supports, employment training, assistive technology, housing, and transportation.

Basically, the ABLE Act provides to disabled persons the same types of saving tools and benefits that all other Americans receive through college saving accounts, health savings accounts, and individual retirement accounts. However, when the beneficiary dies, there is a Medicaid payback provision.

What contributions can be made to an ABLE Account?

Contributions must be made to the account in cash and cannot exceed $14,000 each year. Any contributions that exceed the $14,000 annual limit will be subject to a 6% excess contribution penalty if not corrected in a timely manner.

In the past, disabled individuals could not have more than $2,000 in assets to qualify for programs like Medicaid or Supplemental Security Income. However, with ABLE Accounts, disabled individuals can save up to $100,000. The money that is saved through the ABLE Accounts does not count against an individual’s eligibility for any federal benefits programs.

Caring for the needs of an individual with disabilities can be complex and challenging. The new ABLE Accounts may provide an excellent savings plan for many families with disabilities. It is important, though, that the accounts are handled appropriately to avoid losing federal and state benefits. Therefore, it would be wise to seek the advice of a financial planner or attorney.

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