Parents with a special needs child encounter many difficult choices and considerations. One of the most common, and often a scary issue that parents face is how to provide for a special needs child without impacting or disqualifying that child from his or her needs-based benefits (i.e. social security, medical care). Indeed, it is estimated that, while the average cost of raising a child is approximately $233,000, the cost of raising a child with a serious disability can exceed $2.4 million. For parents in this type of situation, an ABLE account may be the answer.
In 2017, Colorado joined many other states in offering a tax-advantaged savings plan for individuals living with disabilities. The program, entitled Coloradans Achieving a Better Life Experience (ABLE), allows account holders to save money in a tax-deferred status while keeping their needs-based benefits. In this way, an ABLE account is an additional tool that families can use in creating a comprehensive plan for a loved one living with a disability.
To be eligible for a Colorado ABLE account, an applicant must 1.) demonstrate that they live with a qualifying disability, and 2.) provide evidence that the disability began before the age of 26. Those who are blind or who have a written disability diagnosis signed by a physician qualify. Alternatively, an applicant can show that they have a “physical or mental impairment with marked and severe function limitation that has lasted, or is expected to last, at least 12 continuous months or result in death.”
The primary benefit of an ABLE account is that it allows account holders to save money that will not be counted toward their asset limit when it comes to determining eligibility for needs-based programs. Specifically, the first $100,000 will not be considered by the Social Security Administration. Any amount over $100,000, however, will count toward the asset limit and may result in SSI benefits being suspended.
Additional benefits of an ABLE account include:
- Funds in an account can be placed in a variety of investment options;
- Anyone can make a deposit into an ABLE account;
- Up to $15,000 per year can be deposited into the account, unless an account holder is working, in which case they can contribute more;
- The minimum deposit to open the account is $25.
The terms of an ABLE account must be very specific, and it is recommended that parents that are interested in setting up such an account for a special needs child contact an attorney for assistance. If you would like further information on an ABLE account, please see https://www.coloradoable.org/
or contact Anne McMichael at [email protected].