Inclusion Evolution

Empowering Individuals with Down Syndrome at School and Work

Busting the Myths Surrounding ABLE Accounts

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Are you still skeptical about opening an ABLE account for your child with Down syndrome? Do you believe that your child’s SSI or Medicaid benefits would be at risk? Are you afraid the government will take the savings if your child passes?

Even though roughly 10 million Americans could benefit from an ABLE account, only 35,000 accounts have been opened since the first program started in 2016.

The viability of the program relies on more people opening accounts and saving, so it’s important to dispel myths surrounding ABLE accounts. So, why aren’t more people taking advantage of this tax-advantage savings accounts? “In a few words: lack of information and skepticism,” says Senior ABLE Advisor Heather Sachs.

When Troy was first born we opened a special needs trust for him, because of our worry the government would take away any savings left in his name. Before the Achieve a Better Life Experience (ABLE) passed, individuals with disabilities could only have $2000 in their name if they wanted to receive needed government supports.

The special needs trust cost us more than $500 dollars to open. Troy can only use the trust upon my husband and I’s death, because it costs so much to manage the account once in use.

In comparison, it cost us nothing to open and maintain an ABLE TN account, and we can use the money right now just a like a checking account. Special Needs Trusts and ABLE accounts are not mutually exclusive though. They have their own separate costs and benefits, but many people are incorrect in their understanding of ABLE accounts.

This month the ABLE National Resource Center is running an ABLE Awareness campaign to educate the public on the benefits of ABLE. Sign up for their weekly webinars here.

Let’s debunk some of the most common myths surrounding ABLE: 

1. Once the ABLE account exceeds $2,000 the account holder loses his or her SSI and Medicaid benefits.

Wrong! For the first time ever, individuals with disabilities can save like anyone else WITHOUT losing needed government supports. This is a civil rights issue, and one the ABLE law did a good job of remedying. I should be able to save for my son with Down syndrome, just like I save for my typical children. Money in an ABLE account is not a countable asset in determining SSI or Medicaid eligibility. ABLE accounts allow you to save up to $100,000 dollars without losing government disability assistance. Even when the account exceeds $100,000 the account holder’s SSI or Medicaid benefits are just suspended, not canceled. The account holder must spend down below the $100,000 threshold for benefits to kick in again. Also, if money in an ABLE account exceeds the $100,000 ceiling, the beneficiary can still receive Medicaid, SSDI, SNAP, Section 8, etc.

2. If the account holder dies, the government takes all the money in the ABLE account.

Not quite! This is the biggest concern of parents I talk to who are still skeptical about opening an ABLE account for their child with a disability. Here’s what you need to know. ALL outstanding disability expenses are paid first before Medicaid can make a claim. That means burial and medical expenses, outstanding loans, etc. must be paid first before the state can even look at the account. State Medicaid agencies MAY make a claim but are not required to do so. Also, many states like Pennsylvania and Oregon are passing legislation to prevented this “clawback” through legislation. Check you state for details, and start advocating to end the Medicaid clawback in your state.

4. Only the account holder can contribute money into the ABLE account: 

Wrong! Anyone can contribute money into the ABLE account. Family and friends can contribute up to $15,000 a year as a tax free gift. To control the account the person without a disability must have legal guardianship or financial power of attorney. 

3. ABLE Accounts are like 529 College Savings Accounts, but my child with Down syndrome isn’t planning on attending post-secondary school so he/she doesn’t need one.

Wrong! Although ABLE accounts are like 529 accounts in that they’re a tax-advantage type savings vehicle, the account holder can spend ABLE money on much more than just post-secondary costs. “The list of eligible expenses is defined very broadly,” explains Sachs. ABLE account money can be spent on anything that improves the life, independence and wellness of the account holder. This means Troy could use his ABLE account money for an iPad to play his favorite Starfall phonics game. An adult beneficiary could buy an iPhone (assistive technology) to call Uber (transportation) to get to ballroom dance lessons (wellness), and their ABLE account would pay for it all. “There’s no preapproval necessary for these purchases, but keep your receipts in case you’re ever audited,” Sachs says. Click here to learn more about how the ABLE account money can be spent.

4. We already opened a trust for our child with a disability, and you can’t have both a trust and ABLE account.

Wrong! An ABLE account is not in competition with a special needs trust. You can have both; we do. They’re just two tools in your toolbox. The biggest difference is a special needs trust is taxable, usually have higher costs to set up and maintain, and you must have a lawyer or trustee manage it. But the government cannot touch any money in a trust, whereas states MAY make a claim on ABLE money once the account holder passes (after all other disability and life-related expenses have been paid).

As you can see, there a lot of advantages to an ABLE account. There’s tax incentives, low cost to start and maintain, and a wide list of eligible expenses.

Yes, your state MAY make a claim on the account if your child passes suddenly, but this may be a reason to use the account differently than say a special needs trust. You may keep a smaller amount of money in the ABLE account, or use it for grandparents or family members to gift to your child.

For more information about ABLE and sign up for a the ABLE National Resource Center’s webinars click here.

How to Spend ABLE Account Money

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We opened an ABLE account for our 4-year-old son, Troy, this past spring. Ultimately, Troy will decide how to spend this money when he becomes an adult, and his spending options are far-reaching.

The sky is the limit for possible ways to spend money from an ABLE account. 

The Achieve a Better Life Experience (ABLE) Act states that money can be spent on any “qualified disability expense,” and that term is defined very broadly. As long as the beneficiary is eligible, the account can be used to offset the cost of any disability-related expense. This doesn’t just mean medical expenses.

“The ABLE account should be used to maintain or improve a person’s life, well-being, or independence,” explains Chris Rodriguez, Public Policy Director for the National Disability Institute. Categories that these expenses could fall under include:

Education (tuition, books, tutoring)

Housing (rent, mortgage, property tax, funds used for housing expenses will NOT impact SSI  so long as the funds are disbursed from the account in the same month in which the housing expense is paid)

Transportation (Uber, taxi, car payment, bus)

Employment training and support (job coach, continuing education, certification,Interview prep and resume development, Transportation to employment)

Assistive technology and personal support services (cook, housekeeper, iPhone, Dragon Dictation)

health, prevention and wellness (yoga, ballroom dance, medical bills)

financial management

legal fees

expenses for oversight and monitoring

basic living expenses

funeral and burial expenses

The ABLE Act explicitly states that the account is designed to SUPPLEMENT Medicaid supports, not replaces these services. “ABLE can cover gaps in services and supports and, for some people, enable them to maintain Medicaid coverage while possibly saving for future expenses,” says Rodriguez.

ABLE Account holders do not need pre-approval to spend the funds, and many ABLE programs provide pre-paid debt cards to get the money instantly.

Rodriguez says you do need to keep an informal record of what is spent. “Keep track of your receipts of all purchases and record how each expense meets the definition of a ‘Qualified Disability Expense’ in case you’re audited by the IRS,” explains Rodriguez. He says the explanation only needs to be a sentence or two, and if the account holder uses a debit card it will likely keep electronic receipts for you.

Here’s an example of how you can record the Qualified Disability Expense:

Expense: Uber

Cost: $25

How this qualifies as a Qualified Disability Expense: Troy uses Uber to get to work on snowy days, because public transportation is sometimes slow. Without Uber Troy may not get to work on time. Employment and transportation improve Troy’s independence.

Misuse of ABLE Funds

Rodriguez says there are two ways to misuse an ABLE account, potentially threatening the account holder’s eligibility for federal means testing.

  1. Opening more than one ABLE account. “There’s a 10% penalty and income taxation on ABLE funds if it’s found that a person has more than one account. It will also threaten their SSI benefits,” Rodriguez explains.
  2. Spending money on something other than a Qualified Disability Expense. “The same penalty applies if the IRS finds that the ABLE funds have been used on non-QDE.” Rodriguez says the funds can indirectly benefit someone other than the account holder, but the account holder should be the primary person benefitting from all expenses.

If you’re interested in comparing different state ABLE programs go here. To learn more about the myths of ABLE accounts click here. And if you want to learn more about ABLE go here. 

 

How to Open an ABLE Account

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You’ve read the merits of an ABLE account, and now you’re ready to open an account. So, where do you start? 

First, you must find out if the person with the disability is eligible to have an ABLE account. Eligibility is determined by age of onset and severity of the disability, which can be physical, intellectual, mental or blindness. If the symptoms of the disability appeared prior to age 26 and the disability is significant enough that it causes marked and severe functional limitations in the
person’s life, then they would be considered eligible.

Since most of my readers have a loved one with Down syndrome, this is easy because he/she was born with the disability. If the person is already deemed eligible for Supplemental Security Income (SSI) or Social Security Disability Income (SSDI), then they automatically meet the severity of disability requirement.

Next, If they are not yet eligible for SSI or SSDI, then they will need to get a letter certifying the disability from their doctor. Troy falls into this category, because of he is a minor and our income level. There’s still no official certification form that doctors must fill out, so just have your child’s doctor certify that your child’s disability occurred prior to age 26 and causes marked and severe functional limitations in your child’s life.

You won’t actually turn this letter into the ABLE account state agency or the federal government. The IRS and state agencies have stated that they have no way of storing all these confidential medical documents. Instead, you’ll want to keep this certificate in a safe place in case the IRS ever audits the ABLE account. For more information on eligibility click here.

Now, it’s time to compare state ABLE programs.

Twenty-seven states have started ABLE account programs, and most allow non-residents to sign up. For example, we’re a military family living in Ohio this year; who knows where we’ll live next year. We opened a Tennessee ABLE account for Troy, because the state has no cost to open or maintain the account. The down side is Tennessee’s ABLE accounts don’t have debit cards yet, which is ok for us now because we don’t plan to use this account until Troy’s an adult.

Most states let you transfer to another state for low or no transfer cost, if you change your mind about which ABLE program can best suit your needs..

All ABLE accounts have tax savings in that their earnings are exempt from federal and state income tax; much like a 529 account. However, a handful of states have made these accounts even more tax-advantaged by creating an income tax deduction for contributions to an in-state ABLE account.

The best place to compare all the ABLE Programs is the state map comparison tool found at the ABLE National Resource Center.

They have a detailed and interactive comparison chart, which allows you to compare up to 3 states side-by-side using different criteria like whether or not the state has annual set fees or if there’s a minimum contribution.

Remember the potential account holder can have only one account open. Only the guardian of the person with the disability or the person with the disability themselves (or someone with legal power of attorney) can open and be in control of the account.

Check with the state you open the account with to determine who has control of the account once your loved one with Down syndrome becomes an adult. Some states suspend the ABLE account until the account holder decides if anyone else should have control of the account. Other states, like Tennessee, allow the guardian to continue having control unless that power is specifically revoked by the account holder.

Below is an introductory video to understand the benefits of an ABLE account. You can also continue to get information from the ABLE National Resource Center as part of their month-long #ABLEtoSave campaign. Upcoming topics include what the ABLE funds can be used for, what some of the key investment terms mean, and factors to consider when choosing the right program for you and your family.

Let me know below if you plan to open an ABLE account or any concerns you may have.

 

 

 

Why Your Child with Down Syndrome Needs an ABLE account

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Some of the best advice I received when Troy was born was to live in the present; to treat my son like any other baby. Looking too far into the future can be a daunting task for parents with children with disabilities.

What do you mean you haven’t opened that college savings fund yet? Troy (right) with his typical twin (Hunter) at 5 months old.

Will my son live independently? Will he have a job, and be a contributing member of society? Will he have friends and be happy? It may seem easier to ignore these thoughts, but thinking constructively about your child’s future has its rewards.

The Achieve a Better Life Act (ABLE) is one way to control your child’s future success today. ABLE accounts are tax-advantage savings accounts, similar to a 529 college savings account but you can save for so much more than just college.

“ABLE accounts give people with disabilities the potential to significantly increase their independence and quality of life, without jeopardizing benefits such as Medicaid and Supplemental Security Income (SSI),” explains Heather Sachs, Senior ABLE Advisor at the ABLE National Resource Center.

Before ABLE passed, individuals who received disability benefits could only have $2,000 to their name. “This was just so wrong. People with disabilities were forced into a life of poverty and dependence on government,” Sachs said recently at a workshop on ABLE at the National Down Syndrome Congress Conference in Sacramento.

Now, with an ABLE account people with disabilities can save up to $100,000 dollars total without losing their SSI or Medicaid benefits. We opened Troy’s ABLE account this past spring. You can read about it here. I soon realized this is not just a college savings account, and with looming threats to cut Medicaid it may end up supplementing needed government supports.

Troy and other ABLE account holders can use their savings at any age on ANYTHING that will improve their independence, health and wellness. This includes private therapies, medical equipment, assistive technology, school expenses, employment related costs, transportation, and housing just to name a few. 

“The list of eligible expenses is defined very broadly,” explains Sachs. This means Troy could use his ABLE account for an iPad to play his favorite Starfall phonics game. An adult beneficiary could buy an iPhone (assistive technology) to call Uber (transportation) to get to ballroom dance lessons (wellness), and their ABLE account would pay for it all. “There’s no preapproval necessary for these purchases, but keep your receipts in case you’re ever audited,” Sachs says.

ABLE Accounts have a $14,000 a year contribution limit, and 48 states already have ABLE plans. You can compare state plans here. Shop around for the best plan, because most states allow non-residents to sign up.

We went with Tennessee’s ABLE plan (even though we have no connection to the state), because their is no initial or annual cost.

Even though roughly 10 million Americans could benefit from an ABLE account, only 10,000 accounts have been opened since the first program started in 2016. So, why aren’t more people taking advantage of this tax-advantage savings accounts? “In a few words: lack of information and skepticism,” says Sachs.

Now the ABLE National Resource Center (ANRC) wants to change that with an awareness campaign starting the month of August. You can sign up for weekly ABLE informational webinars (every Wednesday in August) here.

Check back next week, when we bust the myths surrounding ABLE accounts.