WTOP Interview: How ABLE Accounts Support Special-Needs Children and Their Families
Shawn Anderson: Good to have your company here at 5:11. Families with special needs children face significant financial challenges to pay for services their kids may need over their lifetimes. With medical and support care often exceeding $100,000 a year, many families rely on government programs and some have ABLE accounts to fill the gap. With more information now, Dawn Doebler, co-founder of Her Wealth and Senior Wealth Advisor at The Colony Group in Bethesda. Dawn, welcome back, thanks for being here.
Dawn Doebler: Thank you!
Hillary: So, Dawn, what actually are ABLE accounts? I’m not sure I ever heard of them before.
Dawn: Well, Hillary, what I like about ABLE accounts, is that they are designed to address two main issues I’ve seen families wrestle with. And that is, first the challenge of saving for these high costs that you mentioned. ABLE accounts are structured like 529 accounts and they can be used certainly for education but also can be used for other qualified expenses. And like 529, if you save in this account, then anything that’s earned in the account is tax free, so long as the distributions are for qualified expenses.
The second benefit is that assets up to $100,000 if they’re held in an ABLE account, are typically not included in needs testing for government programs. This is really a big deal because before the law was passed, if special needs individuals had assets in their own name that exceeded just $2,000, they generally weren’t eligible for public benefits programs like Medicaid and SSI. So with an able account, you can shield assets from counting against someone who otherwise qualifies for government support.
Shawn: What about examples of how they’re used?
Dawn: Well, I observed one of the biggest challenges for parents whose children are still in their developmental years, is not knowing what the future holds. The path for these children, is really very unique for each one of them and that makes education planning and estimating the cost of support services really difficult. So let’s take an example of a 10-year-old who’s diagnosed with autism. At this stage, he’s expected to go to college, get a job, and live on his own. And if he does all of that, the ABLE funds can be used to pay for college and for other services he might need like tutoring. But if he doesn’t go to college, the funds could be used for job training or other health care services. So, his parents can say without worrying about exactly how the funds might be spent in the future.
And another common challenge, is transitioning a disabled child to live alone as an independent adult. And this is where an ABLE account can really be helpful because it allows them to qualify for government programs. For example, one family’s daughter didn’t attend college, but she had jobs skills and she had a part-time job. Her parents had opened an ABLE account and saved money in there for her. So now their daughter deposited her salary into the able account and she was able to learn how to save money and use that account for things she wanted to buy. You can even get a debit card, which is really helpful in these situations. And they shielded her assets in the ABLE accounts, so she was able to qualify for government job skills training, which really improved the quality of her life.
Hillary: Any other things people should know about regarding this?
Dawn: Well, if you’re in this situation, go to our article. There are a lot of requirement; each beneficiary can only have one ABLE account. So, you do need to coordinate within the family if there’s multiple people who want to contribute. There are some requirements:
- You need to be diagnosed prior to age 26.
- And you also need to be expected to have that condition continue for 12 months.
We have a link in the article to ABLEnow.com. That’s where you can go to open an account.
Next week, I’m going to talk about special needs trusts that can be very helpful alongside ABLE accounts and really can improve the quality of life for disabled children and adults.