A new type of savings account is on the scene, designed specifically for people with disabilities: ABLE accounts.
These tax-advantaged savings accounts were made possible by a law passed in 2014. They've been popping up across the country but because they are fairly new and some terms have recently changed, there is still a learning curve.
We spoke to the National Disability Institute to help clarify what you need to know:
WHAT ARE THEY? ABLE accounts are tax-free savings accounts for individuals with disabilities. The money in them can be used to cover certain expenses such as education, housing and transportation. While the beneficiary is the account owner, contributions can be made by anyone with post-tax dollars. Any income earned by the accounts will not be taxed. All withdrawals are tax free as long as they are used for qualifying expenses.
WHY ARE THEY NEEDED? According to the NDI, millions of people with disabilities and their families rely on public benefits for health care, food and more. But eligibility for some of these benefits is contingent on not having more than $2,000 in assets.
"It forces them to live in a life of poverty at all times," said Chris Rodriguez, senior policy adviser at NDI.
ABLE accounts let people hold savings without affecting their eligibility for benefits. They are lower cost and have different terms than previous options, such as a Special Needs Trust or Pooled Income Trust.
WHO IS ELIGIBLE: ABLE accounts are open to people with significant disabilities as long as those disabilities existed before the age of 26. If you meet the age criteria and are already receiving benefits under Supplemental Security Income or the Social Security Disability Insurance program, you automatically qualify. If you do not receive SSI or SSDI, you could be eligible if you meet certain criteria and receive a physician's letter certifying that.
HOW MUCH CAN YOU SAVE: The total contribution is limited to $14,000 a year. But the total amount that can be contributed over the life of the account is determined by each state.
WHERE DO I GET ONE: The programs are established and operated at a state level, much like 529 college savings plans. While individuals once had to open an account in their home state, this provision has been eliminated. So you're free to enroll in a program in your own state or any other program that accepts out-of-state residents.
For more information about ABLE accounts visit the ABLE National Resource Center operated by NDI at www.ablenrc.org .