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Using ABLE accounts to provide future income for the disabled

On Behalf of | Dec 16, 2021 | Estate Planning |

Providing for beneficiaries after your passing takes on a special significance if you have a disabled child who often has significant living expenses. Fortunately, Connecticut residents have several options that will provide income to help keep their disabled children comfortable.

What is an ABLE account?

An ABLE account is a savings account for individuals with disabilities and their families. Income earned through an ABLE account is not taxable for the beneficiary of the account, who is also the account owner. Anyone can contribute to an ABLE account, including the beneficiary, friends, family, and other financial entities such as special needs trusts or pooled trusts.

The U.S. government set up ABLE accounts in 2014 after recognizing that many disabled individuals have considerable expenses. At the same time, disabled individuals must remain “poor” to qualify for government assistance such as SSI, SNAP and Medicaid to help pay their bills. However, those funds are often not enough to meet the living expenses of disabled individuals. ABLE accounts provide a way for disabled individuals to live comfortably while still receiving government benefits that pay for their medical expenses and other essential items.

Structuring an ABLE account

An ABLE account is just one of several estate planning tools you can use to provide for a disabled child. To be eligible for an account, the beneficiary must have incurred the disability before the age of 26. The maximum amount that individuals can contribute to an ABLE account is $15,000 per year.

Note that when the ABLE account balance exceeds $100,000, the beneficiary’s SSI benefits will be suspended. To avoid this potential problem, you should consider different trusts and financial instruments that can also provide for your disabled child after your passing.