Must-Know Info About New Tax-Free Savings Accounts for Families
ABLE accounts will make it easier for special-needs children to get the care and assistance they need.
If you have a child of any age with autism, Down syndrome, or other disability, you likely have various expenses related to his or her care that aren't covered by health insurance. And as you look the future, you want to be prepared for your child's transition into young adulthood. In the next few months, you finally be able to open a tax-advantaged savings account thanks to the Achieving a Better Life Experience (ABLE) Act, which was signed into law by President Obama in 2014.
A form of 529 account, ABLE accounts can be used to pay for your child's expenses including education, housing, transportation, employment training, legal fees, assistive technology, personal support services, health care expenses and financial management. A "qualified disability expense" (for which you will need to provide documentation) is any expense related to living a life with a disability. Parents can deposit up to $14,000 a year, which won't affect a child's eligibility for Social Security, Medicaid, or other public benefits. Before now, a person with a disability could have no more than $2,000 in liquid assets in order to receive Medicaid benefits. The IRS has eased some of its previously proposed regulations in order to make it easier to have an ABLE account.
Each states has been required to have own legislation to establish its IDEA program. So far, IDEA legislation had passed in 33 states and the District of Columbia: AL, AK, CA, CO, CT, DE, FL, HI, IL, IA, KS, LA, MA, MI, MN, MS, MO, NE, NJ, NV, NY, NC, ND, OH, OR, RI, TN, TX, UT, VT, VA, WV, WI. To get more information about opening an account, visit your state's 529 website or consult with your financial advisor.
Diane Debrovner is the deputy editor of Parents and the mother of two daughters.