Raising a child with special needs can be expensive. Last week, Illinois State Treasurer Michael W. Frerichs unveiled the Illinois ABLE plan to help families save for future expenses. The plan was developed by the National Achieving a Better Life Experience (ABLE) Alliance, a consortium of 13 states that worked with Congress and state legislatures to create this special investment program that allows for tax-free investment growth when savings are spent on qualifying disability-related expenses.
The plan is similar to the 529 college savings plans in that families would be allowed to set aside money for future qualified expenses, invest these funds in professionally designed savings accounts, and avoid some tax penalties on the fund. Eligible individuals can open the account for themselves, or an authorized individual can open an account on their behalf. To be eligible, a person must:
- Be entitled to SSI or SSDI because of their disability
- Have their disability present before age 26
Annual contributions per beneficiary are limited to the federal gift tax limit, which is currently $14,000. Like the 529 college savings plan, anyone can contribute to an ABLE plan, including relatives and friends. The Illinois ABLE plan is designed to protect an individual’s federal benefits, and up to $100,000 saved in an ABLE account would not be counted against a person’s eligibility for SSI or other federal means-tested programs. ABLE account holders are still eligible for Medicaid regardless of their account balance.
Withdrawals from an ABLE account are tax-free if used for qualified disability expenses. These are any expenses that are incurred as a result of living with a disability and that are intended to improve the beneficiary’s quality of life. They include, but are not limited to:
- Health and wellness
- Legal fees
- Financial management
- Employment training and support
- Assistive technology
- Personal support services
- Oversight and monitoring
- Funeral and burial expenses
The state treasurer’s office has created a fact sheet to share with families who may benefit from the Illinois ABLE plan. The Illinois ABLE website provides additional information as well as providing a fast and easy way to sign up and create an Illinois ABLE account.