Savings Accounts for Disabled Americans Catch On, but Slowly

“It’s a great tool,” Ms. Gehringer said of the account.

While ABLE programs offer investments like mutual funds and exchange-traded funds, most also offer traditional interest-bearing savings accounts and checking accounts with debit cards that are insured by the Federal Deposit Insurance Corporation. That gives people who are uncomfortable with putting their money at risk in the market a choice of more conservative options, said Rob Percival, a senior vice president with Ascensus, which administers ABLE accounts in 20 states and Washington, D.C.

One drawback of ABLE accounts is that after the account owner’s death, the state may seek reimbursement from the accounts to cover the cost of Medicaid payments.

Here are some questions and answers about ABLE accounts:

How much money can I save in an ABLE account?

The maximum from all contributors is pegged to the annual gift tax exclusion, currently $15,000 a year. Also, as a result of the 2017 tax overhaul law, ABLE account owners who work may contribute extra money from their earnings — up to $12,140 in most states (the amount is tied to the federal poverty level and is higher in Hawaii and Alaska), for a total of about $27,000 a year.

In many states, balances in ABLE accounts can grow up to $300,000 and often much higher — but a temporary suspension of supplemental security benefits will be triggered when an account exceeds $100,000, so that amount acts as an effective cap for many people.

Also under the tax overhaul package, families can now roll over money — up to the annual contribution limit — from a 529 college savings plan into an ABLE account, without paying a tax or penalty. But there are pros and cons to doing so, and families may want to consult a special needs planner, according to the Special Needs Alliance, a nonprofit that provides legal advice to people with disabilities and their families.

Do I have to open an account through the state where I live?

No. Most states open their ABLE programs to nonresidents. Some states offer contributors a state income tax break, however, so using your home state’s program may make sense. (There is no federal income tax deduction for contributions to ABLE accounts.)

The National Disability Institute offers a tool on its ABLE National Resource Center website to help compare state programs.

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