ABLE Accounts Enable Individuals with Disabilities to Prepare Financially for Tomorrow

A New Path to Financial Independence: Taylor Carty's Journey

Taylor Carty's financial journey began with the familiar territory of checking and savings accounts. However, upon completing her college education, she faced a new challenge: finding an innovative way to save for medical school while safeguarding her health insurance coverage.

Navigating Medicaid and the Challenge of Asset Limits

Living with cerebral palsy, Carty is eligible for California's Medicaid program, Medi-Cal, which alleviates some of her medical expenses not covered by her primary insurance. Unfortunately, the strict eligibility requirements of Medicaid dictate that individuals can typically have no more than $2,000 in assets, including funds in bank accounts, making it nearly impossible to save for future endeavors.

Discovering the Power of ABLE Accounts

"I quickly realized that in order to preserve my Medi-Cal while paving the way for my future ambitions, especially my dream of attending medical school, I needed a new financial tool. That's when I discovered ABLE accounts," shares Carty, who now works from Ballard, California, as a research affiliate at the University of California, Santa Barbara, and a research assistant at Syracuse University's Burton Blatt Institute. She is also a passionate ambassador for the ABLE National Resource Center.

What Are ABLE Accounts?

Established by federal legislation in 2014, Achieving a Better Life Experience (ABLE) accounts allow individuals with disabilities to save money without risking their eligibility for crucial public benefits like Medicaid. These accounts function much like traditional savings and investment accounts, with the added benefit of tax-free growth and specific guidelines regarding qualified withdrawals.

Flexibility and Financial Empowerment

Miranda Kennedy, director of the ABLE National Resource Center, explains, "ABLE accounts are supplementary tools, not replacements for the services you currently receive." They offer flexibility and greater autonomy while fostering financial literacy and awareness within the disability community.

State-Sponsored Accounts with Nationwide Reach

More than 40 states and the District of Columbia have jumped on board to offer ABLE accounts, which are also referred to as 529A accounts. While some programs are available to individuals across the nation, each state manages its own program in partnership with financial institutions that offer banking and investment services.

The Benefits of Saving Without Sacrificing Support

ABLE accounts allow participants to save up to $15,000 annually, with income from employment potentially exceeding this limit. Notably, the first $100,000 in an ABLE account is exempt from the asset limits affecting public aid eligibility, such as for Social Security Income. The great news is that Medicaid has no upper limit for account values. As Kennedy points out, "Restricting assets to $2,000 can lead to a life of hardship."

Account Ownership and the Path to Autonomy

The person with a disability is both the owner and beneficiary of an ABLE account, distinguishing it from other financial products like third-party special needs trusts. This arrangement ensures that individuals maintain control and independence over their funds. "I've managed to be quite financially self-reliant," Carty states confidently. "All contributions come from my own earnings."

A Broad Spectrum of Approved Uses

Withdrawals from an ABLE account cover an extensive range of expenses, from education to transportation and health-related needs. According to IRS guidelines, the primary aim is to enhance the individual's health, independence, or overall quality of life. For instance, horseback riding lessons deemed therapeutic for children with autism qualify as valid expenses.

Community Contributions: A Collective Effort

ABLE accounts also welcome contributions from friends and family, which can significantly ease financial strains. As Cheryl Walfall-Flagg, an ambassador for the ABLE NRC, reflects, “When my son graduated high school, I advised everyone to contribute to his ABLE account instead of giving him gifts directly.” This arrangement significantly helps families manage and protect their loved ones' public benefits.

Finding the Right ABLE Program for You

The ABLE National Resource Center provides an excellent starting point. Families can explore their state’s active programs and compare features. Some states even offer tax incentives for ABLE contributions. However, fees and available services differ across states, so hold onto the option of switching plans if another state’s account better suits your needs.

Turning Fears into Financial Security

Before knowing about ABLE accounts, Walfall-Flagg found it challenging to save for her son Sean while ensuring he remained eligible for future benefits. “I often worried about his future,” she confesses. After opening his ABLE account online in 2017, that fear of the unknown dissipated. “Now, when I check his bank statements, I feel a sense of pride knowing he has savings,” she beams.