New Laws Help Kids and Young Adults with Special Needs Save Money for the Future
April is Autism Awareness Month, which highlights the challenges faced by people with Autism Spectrum Disorders and related special needs.
One major, yet overlooked challenge faced by families who have loved ones with special needs is financial. The US Department of Agriculture estimates that the cost of raising a child nearly quadruples when he or she has a disability.
Recent laws passed by Congress are seeking to make it easier for families to save toward future care costs without jeopardizing eligibility for key benefits such as Medicaid or SSI. This includes changes to the tax laws in 2018 that offer more opportunities to accumulate tax-free savings.
Understanding the ABLE Program
The Achieving a Better Life Experience (ABLE) Act was created by Congress in 2014 to help people with disabilities and their families to save up to $100,000 in accounts for the benefit of a disabled person.
The funds can be saved without jeopardizing the individual’s eligibility for Medicaid, Supplemental Security Income (SSI), and other government benefits. Prior to the passing of the ABLE Act, individuals with disabilities were unable to have assets totaling more than $2,000 or earn more than $680 per month without forfeiting eligibility.
ABLE accounts may be opened by anyone with a disability as long as the disability began before the person turned 26.
Changes to the ABLE Program in 2018
Thanks to changes in the tax laws, starting in 2018, the amount of money that can be deposited in an ABLE account per year without jeopardizing public benefits has risen from $14,000 to $15,000.
Traditional 529 plans can also now be rolled into ABLE accounts to help parents utilize funds that were accumulated in college savings plans before learning their child had a disability.
One of the most significant changes is that Individuals with disabilities can now work without fear of losing benefits. Under the new laws, teens and adults who are working can save beyond the $15,000 threshold up to the federal poverty line to potentially accumulate as much as $27,060 per year in savings.
This is a welcome change for many parents who want their kids to experience the independence, pride, and socialization that comes from having a job.
Teens and adults with special needs have traditionally been deterred from working, as any extra money could interfere with benefits. These changes are designed to help people with special needs earn a paycheck without fear of financial consequence.
Is an ABLE Account Right for Your Family?
Setting up an ABLE account is a relatively new and safe way to save money toward future expenses for an individual with disabilities. As with most federal or state programs, there are intricacies in the rules that should be understood prior to establishing an account. It’s important to seek the assistance of a qualified special needs attorney to ensure that you understand the process before tying up your funds.