What Is an ABLE Account? | Virginia Special Needs Lawyers
The Achieving a Better Life Experience (ABLE) Act is legislation designed to provide eligible individuals with tax-advantaged savings. You could open an ABLE account to benefit qualified beneficiaries when you create an estate plan. Your named beneficiaries can use the account to pay for necessary expenses related to their disability, such as transportation and education.
Eligibility Under the ABLE Act
The ABLE Act only allows individuals with a significant disability to set up an ABLE account. They must meet the requirements below:
- Diagnosed with a disability before turning 26 years old
- Have a condition expected to last at least 12 months consecutively
- Currently receive Social Security Disability or Supplemental Security Income benefits
Whether the disabled person, parent of a disabled child, or another eligible party creates the account, they can contribute up to a specific amount each year. The contribution limit is $16,000 a year as of 2022.
Funds in an ABLE account can be used to pay for qualified disability expenses (QDE), such as:
- Personal support services
- Healthcare costs
- Assistive technology
- Employment support and training
- Financial advising and management and administrative services
Advantages of an ABLE Account
There is a range of benefits to opening an ABLE account, including:
- Cost – Creating an ABLE account is a cost-effective way to help a child or young adult with special needs save for the future.
- Tax benefits – The investment income in an ABLE account is not taxable. That means your named beneficiary will not have to worry about paying taxes on the account if they use the funds for qualifying expenses.
- Social Security benefits– Beneficiaries are eligible to use funds in an ABLE account even if they receive need-based benefits, such as Medicaid or SSI.
- Management of funds – A person with a disability can manage their own ABLE account. It allows more independence and financial freedom if the child lives a semi-autonomous life.
Contact us if you are considering opening an ABLE account for your loved one with disabilities. We can guide you through the process of creating a comprehensive special needs plan that safeguards your child’s future. To schedule an appointment at one of our Virginia law firms, contact us at (757) 645-3176 or (866) 603-5976.