Congress recently approved a new savings vehicle that could benefit those caring for someone with a disability. The 529 ABLE (Achieving a Better Life Experience) is a new tax-advantaged savings account that will soon be available. This account gives a tax-advantaged savings option for those diagnosed with a disability before the age of 26.
Similar to the traditional 529 College Savings Account, the ABLE account allows for regular contributions which can grow and be distributed tax free if used for “qualified expenses.” For the 529 ABLE, qualified expenses include education, housing, transportation, personal support services, wellness, and employment training. You can contribute up to $14,000 (per beneficiary) annually and contributions can be made by family, friends, or the beneficiary themselves.
Beyond the tax benefits, ABLE accounts will not interfere with the beneficiary’s ability to qualify for Medicaid and Supplemental Security Income (SSI) benefits, if the balance of the account is less than $100,000. Previously, to qualify for government benefits, a disabled individual could have no more than $2,000 in available liquid assets.
A year ago Congress passed the ABLE ACT and in May of 2015 Texas passed similar legislation to allow ABLE accounts to be created within the state. It looks like Texas ABLE accounts could be available as early as mid-2016. However, a tax law passed earlier this year will allow eligible ABLE account holders to choose a plan sponsored by any state that offers one rather than being restricted to their home state’s plan.
Horizon Advisors will keep an eye out for updates on the 529 ABLE accounts and when the first one will be available. If you would like to receive updates on the status of the Texas 529 ABLE account please contact us and provide your email address and we will keep you informed. If you have questions about 529 ABLE accounts or would like to discuss financial planning in more detail please contact us.