Savings For Those with Disabled Family Members
Those of us with a child or other family member who is disabled know all too well the emotional, physical and financial toll that caring for this person can take on them and the whole family. We are often so absorbed in the daily tasks required to ensure a high level of care and support for them that we are unable to focus on planning for their future. We worry about how they will support themselves as they get older – when those of us who are their providers may have reduced income from retirement or may have passed away.
Many people depend on a wide variety of public benefits for the disabled persons income, health care, food and housing assistance. Eligibility for these public benefits (e.g. SSI, Medicaid) require meeting a test that limits the eligibility of these individual’s access to public benefits if they report more than $2,000 in cash savings, retirement funds and other items of significant value. Basically, the person must stay ‘poor’ to remain eligible for these benefits. Providing for the disabled person’s future, while at the same time ensuring their public benefits are not put at risk, is a complex and daunting challenge. One which typically requires the assistance of an attorney who specializes in this area of planning.
Now there is some GOOD NEWS for individuals with disabilities and their families with the advent of ABLE Savings Accounts!
ABLE Savings Accounts can be included as a source of funding for the disabled person with limited impact on their eligibility for SSI, Medicaid and other public benefits. These are state programs enacted under Federal law, so each state will have its own criteria for how much can be put into an ABLE account without impacting public benefits. Therefore it is vital that you research the various state plans to understand their interplay with public benefits before setting up an account.
What is an ABLE Savings Account?
It is a tax-advantaged savings account offered by certain states, for an individual with disabilities and their families – very similar in concept to the 529 Educational Savings Accounts.
- They are specifically designed for people with disabilities who became disabled before age 26.
- They enable people with disabilities and their families to save and pay for disability-related expenses.
- Contributions totaling up to the annual gift tax exclusion of $14,000 for 2016/2017 can generally be made to an ABLE account each year.
- Contributions are not deductible, but earnings on distributions are tax –free if used to pay qualified disability expenses which include but are not limited to: basic living expenses, housing, transportation, education and legal fees.
- Go to the ABLE National Resource Center at www.ablerc.org where you can access the states which currently provide these accounts.
Does Virginia offer ABLE Savings Accounts?
- YES! They are administered through the Virginia 529 College Savings Plan. Go to www.ABLEnow.com for information on the Virginia Able program.
- In Virginia earnings grow free from both federal and state taxes.
- Virginia offers an annual state income tax deduction of up to $2,000 per contributor for contributions to an ABLEnow account. Contributor must be a VA resident to claim the deduction – just like 529 educational plan contributions.
- For purposes of determining eligibility for SSI, money in a Virginia ABLEnow account in excess of $100,000 is considered an asset to the individual with a disability and may cause SSI benefits to be reduced or suspended. An account balance up to and including $100,000 is disregarded.
- The cumulative Virginia ABLEnow account value limit is currently $500,000.
Call us if you need assistance setting up a Virginia ABLE Savings Account