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New Way to Save for Families and Their Kids with Disabilities

Accounts Offer a Path to Financial Independence

Let’s say you have two children, a daughter and a son. You can freely save money for your daughter’s future, but your son’s is constrained by harsh financial restrictions. While your daughter’s college savings account is free to steadily grow, you are advised not to save money in your son’s name to avoid what could amount to financial penalties. Saving for your daughter’s future seems convenient and straightforward, but for your son, everything is uncertain.

Why the stark disparity in saving for these two children? Your hypothetical daughter is a typical child (with no physical or developmental challenges), while your hypothetical son has a disability. For real parents across the nation who have a child with special needs, this imaginary scenario has been their very real life.

For these parents, providing financial stability for their child with a disability is a constant challenge. Paying for assistive care, medical expenses, education, therapy, and technology can add up quickly. Understandably, parents can be concerned with how they’re going to pay the bills, in addition to preparing their child for independence and financial security later in life.

To help diminish some of that anxiety for families, a new financial product is available in Virginia.

What is an ABLE account?

Signed into federal law in December 2014, the Stephen Beck, Jr. Achieving a Better Life Experience (ABLE) Act authorized states to establish tax-advantaged savings programs for individuals with disabilities. The ABLE Act is considered the most significant federal legislation addressing the needs of persons with disabilities since the Americans with Disabilities Act passed more than twenty-five years ago.

In 2015, Virginia became the first state to approve and pass ABLE legislation, coming on the heels of the passage of that federal ABLE Act. This is particularly poignant because the idea for the ABLE Act was originally conceived by a group of Virginia parents. The Virginia ABLE bill directed Virginia529 (the independent state agency in charge of Virginia’s college savings plan, like the one you might have for your hypothetical typical child) to develop, implement, and administer a new savings program for eligible individuals with disabilities and their families.

ABLEnow accounts are a new way to help individuals with disabilities save money and pay for qualified disability-related expenses, essentially offering families with kids who have disabilites the opportunity to save in a way they had previously not been able to do. For the first time ever, that means tax-advantaged savings, usually without endangering eligibility for the means-tested benefit programs critical to the health and well-being of many people with disabilities. Earnings on ABLE funds grow free from federal and state taxes and can be used for a variety of qualified disability expenses. Account holders can use funds in ABLE accounts for everything from basic living expenses and housing, to transportation
and support services.

Basically, ABLE accounts exist to enhance the account owner’s quality of life and remove many of the financial barriers that previously met those with disabilities. Individuals are now able to save for what they want in life, whether they’re putting aside money for today’s needs or investing for the future to live independently, buy a car, or rent an apartment.

What’s the best part?

ABLE accounts were designed to work with other kinds of aid that individuals with disabilities commonly receive. In most cases, funds in an ABLE account are disregarded when determining eligibility for benefits programs such as Medicaid or Supplemental Security Income (SSI).

And what does that mean for individuals with disabilities and their families?

Now, individuals with disabilities can have more than $2,000 to their name without compromising eligibility for many government benefits programs. Family members and friends can easily contribute to a loved one’s account and feel good about helping without jeopardizing future eligibility for aid. Because this restriction has been lifted, friends and families can give what could be a life-changing gift for a birthday, holiday, or other special occasion. Current ABLE account owners have commented that this opens up a new world of possibility for loved ones.

Participants in Virginia’s program also receive the ABLEnow Card. It’s a debit card that allows the cardholder to pay for a range of qualified disability-related expenses, beyond just medical care. For many with disabilities, it can feel like true financial freedom for the first time.

In Virginia, the ABLE program is called ABLEnow, and is offered through Virginia529. While ABLEnow is available for enrollment nationwide, Virginians making a contribution to an ABLEnow account receive the additional benefit of deducting up to $2,000 in contributions per year from their individual Virginia state income taxes. This is one more way ABLEnow helps families save money for their financial future.

Mary Morris is CEO of Virginia529 and ABLEnow. She began her career as a lawyer specializing in tax, public finance, and securities matters, and as a senior assistant attorney general for tax and finance and as the treasurer of Virginia before joining Virginia529 and ABLEnow almost ten years ago. Mary has two adult daughters and lives in Short Pump with her husband, Bruce.
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