Contact Us Today! (972) 712-1515

"The Blog"

Changes to ABLE Accounts You Should Know

Posted by Darryl V. Pratt | Apr 07, 2019 | 0 Comments

Changes to ABLE Accounts You Should Know

If you have a loved one with disabilities, you may be familiar with “ABLE” accounts, authorized by Congress in 2014 under the Achieving a Better Life Experience Act. ABLE accounts are tax advantaged savings accounts – similar to 529 education savings plans – whose funds can be used to pay for certain qualifying expenses of disabled individuals. As a result of the Tax Cuts and Jobs Act (TCJA), there are several changes that affect ABLE accounts. 

What You Should Know

First, a 529 account can now be rolled over to an ABLE account. However, the ABLE account must be for the same beneficiary as the 529 account or for a member of the same family. Previously, families who originally funded a 529 account for a child whose disability manifested later in life would suffer a tax penalty if the funds were withdrawn from the 529 account to cover medical expenses because they were not allowable education expenses. Now those same funds, through the use of the rollover, can be made available for the beneficiary's disability - related expenses. There are limits as to how much can be rolled over, so it is important to discuss any changes to a 529 plan with your tax professional.

Second, a beneficiary of an ABLE account can now contribute their personal earned income into their own account. The maximum amount a beneficiary can contribute is equal to the annual federal poverty level for a one - person home ($12,490.00 in 2019 in the continental United States and the District of Columbia). These contributions, however, are separate and apart from contributions made to the ABLE account by other individuals (family members, friends, estates, trusts, etc.). Further, a working beneficiary will not be eligible to contribute their own money to the ABLE account if their employer contributes to a workplace retirement plan on his or her behalf.

Third, those beneficiaries who contribute to their own ABLE account, as opposed to others who contribute to the account, may be eligible for the Saver's Credit. Up to $2,000 of the contributions made by ABLE account beneficiaries may be eligible for this credit. This may help lower any income tax owed by the beneficiary or help increase any refund the beneficiary may be entitled to. There are, however, additional requirements that need to be met and it is 

important to check with an experienced professional to determine what credits may be available for a beneficiary who contributes to their own account.

Know Your Options

It is important to know that ABLE accounts, as well as special needs trusts, have an underlying purpose: to supplement, not replace, the benefits and services provided by government programs like Medicaid and Supplemental Security Income (SSI). If you have a loved one with special needs, contact us to help guide you through the process of creating a plan that best suits your family's needs.

About the Author

Darryl V. Pratt

With over twenty (20) of experience as a dual-licensed Attorney and Certified Public Accountant, Darryl V. Pratt has practiced law in all areas of corporate and business law, non-profit law, estate planning, probate, guardianship, asset protection planning, bankruptcy (Chapters 7, 13 and 11), real estate, and taxation.

Comments

There are no comments for this post. Be the first and Add your Comment below.

Leave a Comment

DISCLAIMER Pratt Law Group, PLLC (PLG) has prepared the material on this web site, for informational purposes only; it does not constitute legal advice. Further, the material on this site does not create, and receipt does not constitute an attorney-client relationship. The information here is not intended to substitute for obtaining legal advice from an attorney. No person should act or rely on any information in this site without seeking the advice of an attorney. Members of the law firm of PLG are licensed to practice in various courts and jurisdictions; attorneys are specifically licensed to practice in state courts that are enumerated on their individual attorney profiles. We also have affiliations in particular cases with attorneys licensed in additional states. PLG does not offer any guarantee of case results. Although we are extremely proud of our excellent track record, past success does not guarantee success in any new or future case or client matter. This web site is considered advertising by the State Bar of Texas under the applicable law and ethical rules. The determination of the need for legal services and the choice of a lawyer are extremely important decisions and should not be based solely upon advertisements or self-proclaimed expertise. Only those attorneys who state they are Board Certified in their profiles on this website are Board Certified. All other attorneys are not Board Certified. Darryl V. Pratt is the attorney responsible for this site. The principal office of PLG is 2591 Dallas Parkway, Suite 505, Frisco, Texas 75034. Please note that the transmission of an e-mail inquiry itself does not create an attorney-client relationship. PLG cannot serve as your counsel in any matter unless you and our firm expressly agree in writing that we serve as your attorney. You should also be aware that the Statute of Limitations (the deadline imposed by law within which you may bring a lawsuit) may have expired or may severely limit the time remaining for you to file any potential claims you may have. Time is of the essence. If you believe you have a possible legal case, it is important that you seek out legal advice as soon as possible.

Menu