Setting Up An ABLE Account For Your Child With Special Needs
Have you dreaded doing something because you thought it was going to be super involved and difficult?
You can’t see me, but I’m totally raising my hand right now! This was me and setting up an ABLE account.
This was on my “To Do” list for a REALLY long time. I kept dragging my feet because I had myself convinced it was going to be difficult.
So, I kept stashing money away in a savings account earmarked for Max and years, yes actual years, rolled on by. Max kept getting older (kids tend to do that no matter how much we don’t want them to) and I realized this was ridiculous.
Max would be better served having that money in an ABLE account than a savings account with my name on it.
I told myself suck it up buttercup.
So I did.
And I was pleasantly surprised.
Let’s back it up though. Some of you may be wondering….
Setting Up An ABLE Account: What is an ABLE account?
An ABLE account is a tax-advantage savings account for people with disabilities. Very similar to a 529 college savings account which you may be more familiar with.
An ABLE account allows us to set aside money for our kids with special needs without impacting their ability to qualify for need based programs. It’s a golden nest egg to help them live their best life.
Setting Up An ABLE Account: Why does my child with special needs need an ABLE account?
Fabulous question!
At some point in your child with special needs life he or she may depend on public benefits for income, health benefits, housing assistance, etc.
Basically to be eligible for these benefits an individual has to remain poor right?
So, if your 30 year old son who has Down Syndrome is receiving health insurance through the government (Medicaid or Medicare) and dear old Aunt Dolores passes away and leaves him $50,000 in her will guess what?
It’s very likely he will lose his health insurance.
Now, if dear old Aunt Dolores passes away and leaves $50,000 to your son’s ABLE account guess what?
Nothing happens to his health insurance!
Your son can use that money to pay for an art class he wanted to take at the local community college, to buy groceries, or to pay for a bus pass.
Cue the happy dance!
Funds in an ABLE account will NOT impact your child with special needs eligibility for need based benefits they may be receiving such as medicaid, SSI, SNAP, etc.
This REALLY helps individuals with special needs live their best life.
Setting Up An ABLE Account: What expenses can you use the money in an ABLE account for?
According to the PA ABLE brochure we received in the mail eligible expenses are…
Basic living expenses such as mortgage/rent/property taxes/utilities
Education
Transportation
Employment training and support
Assistive technology
Personal support services
Health/wellness/prevention
Financial management and administrative services
Legal fees
Oversight and monitoring
Funeral/Burial
Setting Up An ABLE Account: What are the tax benefits of an ABLE account?
We live in Pennsylvania. The tax benefits are going to vary from State to State. Once again, referencing the PA ABLE brochure we were sent in the mail in Pennsylvania a few of the benefits are contributions are…
Pennsylvania state income tax deductible up to $15,000 per person
Upon death, no funds in a PA ABLE account are subject to Pennsylvania inheritance tax
Earnings are not subject to yearly taxation for either federal or Pennsylvania taxes while they remain in the account
When used for qualified disability expenses, the growth in your account is not subject to federal or Pennsylvania income taxes.
Setting Up An ABLE Account: Our experience setting up an ABLE account
The first thing I did was go online to www.paable.gov and request information on the PA ABLE account be sent to us via snail mail. A big packet arrived and I reviewed everything.
You can certainly find this information online, but I’ve always been a paper kind of gal. I think I just process things better when I’m holding something in my hands reading it. I can mark it up and make notes too!
Hubby and I reviewed the info, talked it over, and decided to go for it.
A paper enrollment form was included in the packet, but I decided to sign up online.
First, I had to choose the account type I was opening. The choices were…
I am opening an account for myself
I am the authorized individual (parent or guardian) of a minor account owner
I am the authorized individual (parent, guardian, conservator, or power of attorney) of an adult account owner who lacks the capacity to contract
You do have to submit documentation proving you have the authority to set up an account for your child such as sending in a copy of the birth certificate.
You fill in all of the account owners information such as name, date of birth, social security number, address, and phone number. If the account owner has a valid driver’s license or valid I.D. card that info is also requested.
The next thing you have to do is select the account owner’s disability, the onset of which occurred prior to their 26th birthday. The options are the following…
Code 1 Developmental Disorders: Autism Spectrum Disorder, Asperger’s Disorder, Developmental Delays, and Learning Disabilities.
Code 2 Intellectual Disability: May be reported as mild, moderate, or severe intellectual disability.
Code 3 Psychiatric Disorders: Schizophrenia, Major Depressive Disorder, Post-Traumatic Stress Disorder, Anorexia Nervosa, Attention Deficit Hyperactivity Disorder, Bipolar Disorder.
Code 4 Nervous System Disorders: Blindness, Deafness, Cerebral Palsy, Muscular Dystrophy, Spina Bifida, Juvenile-Onset Huntington’s Disease, Multiple Sclerosis, Congenital Cataracts.
Code 5 Congenital Anomalies: Chromosomal Abnormalities, including Down Syndrome, Osteogenesis Imperfecta, Xerodermatic Pigmentosum, Spinal Muscular Atrophy, Fragile X Syndrome, Edwards Syndrome.
Code 6 Respiratory Disorders: Cystic Fibrosis
Code 7 Other: Includes Tetralogy of Fallot, Hypoplastic Left Heart Syndrome, End-Stage Liver Disease, Juvenile-Onset Rheumatoid Arthritis, Sickle Cell Disease, Hemophilia, and any other disability not listed under Codes 1-6
Then I had to choose under which basis ABLE eligibility is asserted.
The account owner if entitled to Supplemental Security Income benefits under Title XVI of the Social Security Act
The account owner is entitled to Social Security Disability benefits under the Title XVI of the Social Security Act
The account owner self-certifies that he or she meets the Disability Certification requirement, including possessing a written disability-related diagnosis signed by a physician who meets Social Security Act criteria
Finally, I had to put in all of my personal information as the authorized individual and you can put in the personal information of a co-authorized individual (Hubby’s info went there).
You can open the account with only $25 and make contributions whenever you want.
The contribution must be $25 or more though.
The account balance limit is $511,758 per the PA ABLE brochure I have. It’s super nice because you can contribute by mailing checks, electronic fund transfers, payroll deductions, or automated withdrawals from your bank account. You can invite others to contribute as well such as friends, family, employers, or trusts.
You do have to choose your investment options.
You can choose one or any combination of seven investment options. Six are asset allocation investment options and the 7th is an interest bearing checking account with a debit card.
You are not locked into anything and can change your options for new contributions any time.
Setting up an ABLE account wasn’t hard and I’m super happy to help Max save for his future!
Mama Bears, this was SUPER easy!
I had been putting it off for YEARS because I thought it would be hard.
Boy was I wrong!
If you’ve been kicking around the idea of an ABLE account for your little one DO IT! Don’t wait like I did.
The earlier you start the more likely your child with special needs will have an ABLE account with a larger amount of money in it they can use to live their best life!
In case you’re wondering, because I realize I sound a bit like I’m selling ABLE accounts over here I am not receiving any compensation from an ABLE program for this blog post.
I simply feel it’s a great tool to utilize to help our kids live their best life as an adult.
I was dreading signing up because I thought it would be difficult and was pleasantly surprised. I just love when that happens!
Mama Bear, if you found this post helpful then you may want to check out…
Special Needs Trust: A Guide For The Special Needs Mom
Dandelion Tribe Takeaway: An ABLE account is a tax-advantage savings account for people with disabilities that doesn’t impact their ability to qualify for need based programs such as Medicaid. The money in an ABLE account can be used to pay for basic living expenses, education, health and wellness as well as other qualifying expenses.
Mama Bear Share: Have you set up an ABLE account? What was your experience like?