New ABLE Accounts Help Families with Disabled Children Save Money
Through the Achieving a Better Life Experience Act of 2014, Congress created a new option to help parents of children with disabilities save. This option, called an ABLE account, is similar to 529 accounts for college savings. These accounts assist families in saving for their child’s disability needs, including assisted living, special-needs transportation, medical treatment, assistive technology, legal fees, education fees, occupational therapy, or other such “qualified disability expenses.”
To qualify for an ABLE account, the beneficiary of the account must have been disabled or blind before the age of 26. Anyone can contribute to this person’s ABLE account and the account can accrue up to $14,000 per year. These contributions are not tax-deductible, but the investments earned on the account are not taxed as long as the money is always being used for qualified disability expenses. If the beneficiary chooses to use a portion of the money for something other than a qualified disability expense, a 10% tax penalty will apply and the beneficiary will have to pay income taxes on a portion of the withdrawal that consists of investment earnings instead of contributions.
Who Benefits from ABLE Accounts?
ABLE accounts can be used for people under the age of 26 who have been confirmed blind or disabled. Currently, they are state-level accounts limited to a few U.S. states, but people can open them in states outside of their own. It is advised that citizens check to see if their state has tax incentives before looking to another state for an account.
There are fees associated with ABLE accounts under certain conditions. For example, in Virginia there is a fee of $3.25 per month for anyone with an ABLE account (including those in other states) unless that account contains an average daily balance of $10,000. Other states have similar fees or larger ones for people who hold accounts but aren’t state residents. Some plans come with a debit card and some do not. Because of these state differences, someone looking to start an ABLE account may want to consider the account benefits in different states when deciding if it is the right account for them.
Learn more about whether an ABLE account is right for you.
How can ABLE Accounts Assist Children with Birth Injuries?
Because ABLE accounts are savings accounts specifically tailored to beneficiaries with disabilities, they are helpful for children who have experienced birth injuries. Birth injuries such as hypoxic-ischemic encephalopathy and cerebral palsy both involve brain damage and long-term neurodevelopmental impairments. Thus these conditions will require therapy, medical treatments, educational assistance, assistive technologies, and other helpful tools throughout life. Parents of children with birth injuries may consider ABLE accounts to save for the futures of their children.
Trusted Legal Help with HIE, Cerebral Palsy, and Other Birth injuries
Reiter & Walsh ABC Law Centers is a national birth injury law firm that has been helping children since its inception in 1997. While our team is based in Michigan, we handle cases all over the United States. Our attorneys are able to assist clients from Michigan, Ohio, Washington D.C., Arkansas, Mississippi, Pennsylvania, Tennessee, Texas, Wisconsin and other states. The Reiter & Walsh, P.C. birth trauma team has also handled FTCA cases involving military medical malpractice and federally funded clinics.
If your child was diagnosed with a permanent disability or injury, such as brain damage, cerebral palsy, epilepsy or hypoxic-ischemic encephalopathy (HIE), our award-winning team can help. Our legal and medical team has helped families throughout the country obtain compensation for lifelong care, treatment, therapy and security. To learn more about our past cases, we encourage you to visit our Case Results page here. Because we work on a contingency basis, you will never pay anything until we reach a favorable verdict, settlement and case outcome for you and your family.
- 7 Tips for Special Needs Financial Planning (By Kacy Seitz)
- TurboTax: Tax Benefits Explained
- ABLEnow: Is an ABLE Account Right for You?
- U.S. News: What to Know Before Opening an ABLE Account
- TIME: Why a New Savings Plan for the Disabled is a Game Changer
The attorneys at ABC Law Centers are not licensed financial planners or financial attorneys. For assistance in disability financial planning, please see a licensed financial professional. This article is intended as a general educational resource only and should not be interpreted as legal or financial advice.