For parents of children with disabilities, there exists something called an Achieving a Better Life Experience (ABLE) account that’s a godsend.
Read more: Best 529 plans to help pay for college
ABLE accounts explained
Signed into law in December 2015, the ABLE Act offers a way for the parents of disabled children to save money for college and other expenses à la a 529 plan.
Just like with 529 plans, ABLE accounts are administered by the states and you can participate in any state’s plan regardless of where you live. You may, however, get a tax benefit for participating in your state’s plan.
To qualify for participation, your child needs to have a diagnosable disability before age 26 that is expected to last 12 consecutive months or longer. Your child must also be receiving SSI and/or SSDI.
Participating in an ABLE plan allows you to save money tax-free and spend it tax-free on your child’s qualified educational expenses, such as tuition, housing, transportation, job training and more.
Annual contribution limits for 2017 are set at $14,000, which is the amount of the annual gift tax exclusion that lets you give money to anyone tax-free for any reason.
Setting the bar at $14,000 for the year effectively removes the barriers that existed before. Previously, a disabled person risked losing out on government programs if their monthly income exceeded $700 or they had savings and other assets valued at more than $2,000.
Certain states will cap lifetime ABLE contributions at $300,000, according to SavingforCollege.com. But there’s an earlier mile marker to take note of before you reach that goal; when your child’s ABLE account balance is $100,000, he or she can longer receive SSI benefits.
If you’ve already saved money for your child in a traditional 529 plan prior to a disability diagnosis, you may be able to roll that money into an ABLE account if your child has a disability that manifests after they’re well into their school years, such as autism.
Here’s a list of states with ABLE plans, courtesy of SavingforCollege.com:
|State||Plan Name||Residency Requirement||State Tax Deduction||Total Asset-Based Expense Ratio||Debit or Purchasing Card?|
|Alabama||Enable Savings Plan Alabama||NO||NO||0.50%-0.56%||YES|
|Alaska||Alaska ABLE Plan||NO||NO||0.34%-0.38%||NO|
|Illinois||Illinois ABLE||NO||NO||0.34%-0.38%||Spring 2017|
|Kansas||Kansas ABLE Savings Plan||NO||NO||0.34%-0.38%||Spring 2017|
|Minnesota||Minnesota ABLE Plan||NO||NO||0.34%-0.38%||Spring 2017|
|Nebraska||Enable Savings Plan||NO||$10,000*||0.50%-0.56%||YES|
|Nevada||ABLE Nevada||NO||NO||0.34%-0.38%||Spring 2017|
|North Carolina||NC ABLE||NO||NO||0.34%-0.38%||03/31/2017|
|Oregon||Oregon ABLE Savings Plan||YES||$2,310/$4,620**||0.30%-0.38%||YES|
|Oregon||ABLE for ALL Savings Plan||NO||$2,310/$4,620**||0.30%-0.38%||YES|
|Rhode Island||RI’s ABLE||NO||NO||0.34%-0.38%||Spring 2017|