How to Put a Disabled Family Member on a Good Financial Path


Michelle and Donald McCulloch bought a house using their ABLE savings.

Michelle and Donald McCulloch

Most people take the ability to save money for granted.

But for people with disabilities, whether physical or developmental, a previous $2,000 limit meant they couldn’t plan and save for a home, car or vacation.

“The things we all appreciate and put money aside for, to have a good life,” said Robin Arter, executive director of the nonprofit Think Ability in Duncan, Oklahoma.

Accumulating more than $2,000 would have meant losing essential benefits, such as Medicaid or access to support services.

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Through ABLE accounts, also known as 529 A savings accounts, a couple bought a house and a woman is saving for a condo.

These achievements were only possible in 2014, when ABLE accounts were enacted under the same tax code as 529 college savings plans. Their goal was to allow people with disabilities to save money without losing benefits such as Social Security Supplemental Income or Medicaid.

Tax-advantaged savings accounts have transformed the financial lives of people with disabilities and their families.

“They weren’t allowed to dream, and we really need to incentivize them,” Arter said. Suddenly people are having conversations about what they want for their future. In the past, there was always a ceiling.

“Emotional Barrier”

Compared to 529 college savings plans, ABLE accounts may not seem to attract many users. In the third quarter of 2019, there were more than 51,000 ABLE accounts with approximately $300 million in assets under management, according to ISS market intelligence, a mutual fund analytics firm. For the same period, 14 million accounts invested $351 billion in 529 savings and prepaid plans.

One reason: Several generations of parents of children with disabilities have been warned about keeping money on behalf of their children, said Chip Gerhardt, an Ohio-registered lobbyist and federal and state advocate. of ABLE who worked to pass legislation.

Since 1964, people have turned to special needs trusts, if anything, to financially plan for their children. “It’s hard to immediately jump into putting money in an account,” he said. “I think there is an emotional barrier.”

Over time, data shows accounts are growing in number and assets, said Andrea Feirstein, chief executive of AKF Consulting, a city councilor for state-run investment plans.

In Ohio alone, about 100 new accounts have been opened each week since the program began, Gerhardt said.

When Stuart Spielman, senior vice president of advocacy at Autism Speaks, opened an account for his autistic son, he recognized it as “a product really designed for people like my son,” he said. “It’s designed so that it doesn’t lose its benefits. Until recently, there was nothing to meet the basic needs of someone with autism and other disabilities.”

Choose a program

The information on ABLE can seem overwhelming. Start with your own state, says Feirstein. Forty-two states and the District of Columbia have plans. There is no federal tax deduction for contributions, but some states provide a benefit in the form of a credit or deduction. The annual contribution limit is based on the gift exclusion tax: $15,000 for 2020. Active account holders can contribute an additional $12,060 through payroll deductions.

Next, check to see if yours is one of the 16 states with tax relief on dues. They are Arkansas, Illinois, Iowa, Kansas, Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska, Ohio, Oregon, Pennsylvania, South Carolina , Virginia and West Virginia.

Next, look at the fees. the ABLE National Resource Center has a comparison tool for a side-by-side look at different plans. Once you have an idea of ​​account fees, check the state specific sites for details. Keep in mind that there are different types of fees: for maintaining the account, for actual investments, and for administering the state program.

Look at the states that have a Medicaid clawback policy. After the death of an account holder, some states will seize unused assets from the account due to benefits granted over the years.

You’ll also want to see if a plan offers a prepaid card or debit card, and if the card can be used by someone’s caregiver. “It’s less important than what it’s going to cost or what [your] the state will do, Feirstein said. “But ease of use is something to consider.”

A house of their own

Before they could save using an ABLE account, Michelle McCulloch, 41, and Donald McCulloch, 40, had to contend with a monthly drop in spending so they wouldn’t go over the asset limit. Everyone has an intellectual disability. They bought clothes, an iPad, DVDs – just to make sure they didn’t run into the tripwire that would jeopardize their benefits.

Both McCullochs have fast food jobs and Donald does volunteer work. They now focus on saving and budgeting, not spending. Donald’s mom says they fill out an expense budget form, bills and other necessities every week. They look at what is left and calculate their costs and the amount to be saved.

Within two years, they had saved enough in the account to buy their home in Duncan, Oklahoma, which is convenient with nearby businesses and restaurants, as well as friends who live nearby. Among other goals, Donald McCulloch would like to participate in the Special Olympics in basketball, bowling, running and softball throwing, a goal he can help pay for using the ABLE account.

Become a saver

Rosie Lawrence-Slater (left) and Gail Jacobs take a break from cooking for homeless families at their Cincinnati synagogue.

Source: Rosie Lawrence-Slater

Rosie Lawrence-Slater, 31, lives in Norwood, Ohio, a suburb of Cincinnati and also has a developmental disability. With the help of her mother, she opened an ABLE account in her home country in 2017. She planned to use it for some legal expenses, but it is now her savings account.

In addition to Lawrence-Slater’s own contributions, family members and friends also contributed money by direct transfer. Because a debit card could be tempting, Lawrence-Slater chose not to have one. She uses the account for long-term savings.

In just under two years, Lawrence-Slater has raised just over $13,000, which is earmarked for a condo. “It makes me really proud of myself,” she said.

“It’s never too early”

Alexander McClain, 2, has an ABLE account opened by his parents.

Source: Lauren McClain

He is only 2 years old, but Alexander McClain already has money hidden in an ABLE account opened by his parents.

Lauren McClain, Alexander’s mother, is 36 and works for a bank that offers trust services, including ABLE accounts. She opened the account when he was born with Down syndrome, an eligible disability. About 6,000 babies with the disease are born in the United States each year, according to the National Down Syndrome Society.

McClain says the account indirectly benefits her older children. “That’s our goal,” she said. “To make sure the older kids can make sure Alex’s future is for him without worrying about the services he needs.”

McClain uses as aggressive an investment strategy as the plan allows. “We are very aggressive because of his age,” she said. “It’s really for his future.”

A job and a future

Anne Gerhardt, 22, saves in an ABLE account so she can leave her parents’ house.

Source: Jane Gerhardt

Gerhardt is not just an attorney who has worked on federal and state legislation on ABLE accounts. He is also the father of the country’s first ABLE account holder: his daughter, Anne Gerhardt, 22, who has Down syndrome.

Ohio was the first state to open a program, and Gerhardt immediately opened an account. “I don’t want to leave anything to chance when we’re not around when it comes to taking care of our daughter,” he said.

Anne, who works at a Kroger grocery store, plans to use a debit card for clothes, food, rent and Uber rides once she leaves her parents’ house. “Have a STABLE account [the Ohio plan] allows me to use my own money for the things I need,” she said.

“It’s the most important professional achievement I will ever have,” Gerhardt said. “I can’t imagine anything bigger than that.”


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