Post by Admin/YBB on Aug 9, 2021 13:03:52 GMT -6
ABLE = Achieving Better Life Experience Act of 2014
Disability 529A or 529 ABLE are state-run programs. The general college 529 framework is also used for program to support young people with disabilities. It is strange that similar frameworks are used for college 529 and disability 529A and this may be a reason that many are not familiar with disability 529A. ANY STATE 529A can be used (if open to nonresidents), but several states offer incentives to their residents. Earnings grow tax-deferred, and withdrawals are tax-free for qualified expenses.
ELIGIBILITY. Beneficiary must be diagnosed with long-term disability before the age of 26 (Secure 2.0, 2022 raised the age to 46 starting from 2026; edited 2/9/23), but disability 529A benefits can continue for lifetime. REQUIREMENTS include doctor certification of disability, or getting SSI and/or SSDI benefits. Disability 529A program only requires personal CERTIFICATION of eligibility at the time of application, and annual recertification of eligibility if the disability is not of permanent nature; the IRS and/or SSA may require more detailed information, so keep contemporary records. Beneficiary remains eligible for MEDICAID (a great benefit of 529A), but SSI may be suspended if the 529A balance exceeds a certain amount. After the death of beneficiary, states may RECOUP some of Medicaid assistance from 529A. Only one disability 529A is allowed per beneficiary (unlike multiple college 529s), but transfer to another 529A is allowed and the old 529A must be closed ASAP. Transfer of disability 529A to another eligible beneficiary of the same family is also allowed.
QUALIFIED EXPENSES include healthcare, financial management, housing, food, transportation, assistive equipment, education, job training and support, legal, funeral, burial, etc. 10% penalty and tax apply for nonqualified expenses. Track and keep record of qualified expenses in case asked by the IRA and/or SSA; 529A program does not require or monitor this information.
CONTRIBUTIONS up to the annual gift exemption are allowed, PLUS some contributions from the earned income of the beneficiary are also allowed (if the beneficiary is not participating in workplace retirement plans 401k/403b). States have limits on the total 529A contributions (but not on 529A account balance).
Limited ROLLOVER of college 529 into disability 529A of the same beneficiary is also possible. For example, a college 529 may have been setup for a newborn who is later diagnosed with long-term disability before the age of 26, then the college 529 may be rolled over gradually into disability 529A. Basically, the sum of new contributions and rollovers from 529 into 529A must be within the annual gift exemption. As both 529 and 529A are allowed for the same beneficiary, those may coexist and there may be some advantages to that; it should be possible to split the annual gift exemption between college 529 and disability 529A (although explicit mentions of this were not found).
IRS www.irs.gov/government-entities/federal-state-local-governments/able-accounts-tax-benefit-for-people-with-disabilities
SSA secure.ssa.gov/poms.nsf/lnx/0501130740
FINRA www.finra.org/investors/learn-to-invest/types-investments/saving-for-education/able-accounts-529-savings-plans
Saving for College www.savingforcollege.com/529-able-accounts/
ABLE National Resource Center www.ablenrc.org/what-is-able/what-are-able-acounts/
Example, IL 529 ABLE illinoisable.com/
Disability 529A or 529 ABLE are state-run programs. The general college 529 framework is also used for program to support young people with disabilities. It is strange that similar frameworks are used for college 529 and disability 529A and this may be a reason that many are not familiar with disability 529A. ANY STATE 529A can be used (if open to nonresidents), but several states offer incentives to their residents. Earnings grow tax-deferred, and withdrawals are tax-free for qualified expenses.
ELIGIBILITY. Beneficiary must be diagnosed with long-term disability before the age of 26 (Secure 2.0, 2022 raised the age to 46 starting from 2026; edited 2/9/23), but disability 529A benefits can continue for lifetime. REQUIREMENTS include doctor certification of disability, or getting SSI and/or SSDI benefits. Disability 529A program only requires personal CERTIFICATION of eligibility at the time of application, and annual recertification of eligibility if the disability is not of permanent nature; the IRS and/or SSA may require more detailed information, so keep contemporary records. Beneficiary remains eligible for MEDICAID (a great benefit of 529A), but SSI may be suspended if the 529A balance exceeds a certain amount. After the death of beneficiary, states may RECOUP some of Medicaid assistance from 529A. Only one disability 529A is allowed per beneficiary (unlike multiple college 529s), but transfer to another 529A is allowed and the old 529A must be closed ASAP. Transfer of disability 529A to another eligible beneficiary of the same family is also allowed.
QUALIFIED EXPENSES include healthcare, financial management, housing, food, transportation, assistive equipment, education, job training and support, legal, funeral, burial, etc. 10% penalty and tax apply for nonqualified expenses. Track and keep record of qualified expenses in case asked by the IRA and/or SSA; 529A program does not require or monitor this information.
CONTRIBUTIONS up to the annual gift exemption are allowed, PLUS some contributions from the earned income of the beneficiary are also allowed (if the beneficiary is not participating in workplace retirement plans 401k/403b). States have limits on the total 529A contributions (but not on 529A account balance).
Limited ROLLOVER of college 529 into disability 529A of the same beneficiary is also possible. For example, a college 529 may have been setup for a newborn who is later diagnosed with long-term disability before the age of 26, then the college 529 may be rolled over gradually into disability 529A. Basically, the sum of new contributions and rollovers from 529 into 529A must be within the annual gift exemption. As both 529 and 529A are allowed for the same beneficiary, those may coexist and there may be some advantages to that; it should be possible to split the annual gift exemption between college 529 and disability 529A (although explicit mentions of this were not found).
IRS www.irs.gov/government-entities/federal-state-local-governments/able-accounts-tax-benefit-for-people-with-disabilities
SSA secure.ssa.gov/poms.nsf/lnx/0501130740
FINRA www.finra.org/investors/learn-to-invest/types-investments/saving-for-education/able-accounts-529-savings-plans
Saving for College www.savingforcollege.com/529-able-accounts/
ABLE National Resource Center www.ablenrc.org/what-is-able/what-are-able-acounts/
Example, IL 529 ABLE illinoisable.com/