Why special needs parents should consider a CalABLE account
Financial security is a top priority for parents raising a child with special needs. It is true for every parent, but consider this: in 2018, it was estimated that the lifetime cost for an individual with autism and/or other disability averages $1.4 to $2.4 million. When compared to the cost of raising a child without a disability (about $240,000 from birth to 18) the difference is stunning. Many financial planners and parents are seeking help from CalABLE in order to plan for the ongoing care of an individual with a disability such as autism.
An ABLE account is simply a tax-advantaged saving account for disabled individuals that was created in 2014 through the ABLE Act. ABLE stands for Achieving a Better Life Experience. When H.R. 647 was introduced, its purpose was to amend the IRS Code of 1986 in order to provide for the tax treatment of ABLE accounts established for the care of family members with disabilities (under state programs).
What makes an ABLE account unique is the fact that supplemental security income will not be terminated when the ABLE account stays under $100K, nor would there be an impact on MediCal eligibility. A person with an ABLE account would continue to receive their benefits and services and not be penalized as such for having “excess resources.”
Before 2014, the risk of losing benefits limited individuals with disabilities from building financial security. There is (and always has been) a high cost for support expenses for the person with autism or other disability.
Eligibility is determined by age of onset of disability: individuals with a disability that occurred before the age of 26 are eligible. If the person is not a recipient of SSI or SSDI, but still meets the age of onset requirement, they can still be eligible for an ABLE account with certain criteria and a letter from a licensed physician.
Assets in the ABLE account, up to $100K, will not affect the person’s ability to receive state and federal benefits such as SSI and Medicaid. California residents are protected from both creditors and repayment of medical assistance. What’s more: MediCal is prohibited from filing a claim against an account after the beneficiary has died.
- Family, friends, and/or donors can contribute up to $15,000 per year to the individual’s ABLE account.
- Account owners who work can contribute additional amounts above that $15,000 limit.
- A reloadable, prepaid Visa card is an optional service to participants.
- The account lets the person build up savings to support independence and productivity.
So what can CalABLE accounts be used for? The answer is many different disability-related expenses such as:
- Education (tuition, books, computers, supplies)
- Housing (rent, purchase of primary home, expenses of primary home, mortgage payments, mortgage insurance, property taxes, utilities expenses, home improvements and repairs, renovations)
- Health and Wellness (health insurance premiums, medical/mental/dental/vision care, rehab services, medical equipment, therapy, nutritional support, personal assistance, respite care)
- Assistive Technology (assistive and personal support, communication services and devices, adaptive equipment)
- Employment Support (job related training and coaching, costs related to gaining and maintaining employment, benefits planning)
- Transportation (use of mass transit, purchase and upkeep of vehicle, taxis and driving services, moving expenses)
- Miscellaneous (legal fees, financial management, funeral expenses, supervision and monitoring)
CalABLE also offers a total of four savings and investment options. CalABLE is designed to serve all eligible people in the disability community, but realizes investment strategies may differ greatly based on circumstances, time constraints, and life goals. Account owners (and their managers) can consider conservative, moderate, aggressive, and/or FDIC-insured portfolios for investments. They allow spreading your savings among a couple of the portfolios as well. (There is flexibility to change investment allocations twice per calendar year.)
In 2015, Governor Jerry Brown signed the California ABLE Act into law. It opened to the public in December, 2018. The program now gives Californians and out-of-state residents the ability to save for disability-related expenses in a tax-advantaged account while protecting benefit eligibility. Earnings grow tax-deferred and withdrawals can be used for a broad range of qualified expenses. The account is federal and state tax-free.
In 2019, a statute was adopted that allowed taxpayers to roll-over Section 529 plans to ABLE accounts. They have since altered the fee structure associated with this action.
The National Disability Institute has teamed up with CalABLE to provide tools and resources to help people with their CalABLE account.
NOTE: The plan is managed by TIAA-CREF Tuition Financing, Inc. The California ABLE Act Board sets investment policies and oversees all activities of CalABLE.
Phone: 1-833-CAL-ABLE (833-225-2253)
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Keri is a special needs parent and a veteran high school English and journalism teacher turned writer. She enjoys reading, hiking, gardening, cooking, traveling, wine tasting, and practicing yoga. Both she and her son love to create art. She has a passion for educating people on all things autism. Visit her blog at www.kerimehome.com.View All Posts