Patty Manko Sat, May 13, 2017 @ 08:02 AM 11 min read

Using the ABLE Account: A Case Study - Save and Have Control of Your Own Money

The Special Needs Financial Planning Team  Cynthia Haddad, CFP | John  Nadworny, CFP | Alexandria Nadworny, CFP  We are committed to offering educational workshops to organizations and parent  groups.  Please call Alex or click here to attend a workshop or discuss a presentation  to your group.

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ABLE to Save and Control Your Own Money

One benefit of The ABLE Account is that it provides the opportunity for gainfully employed people with disabilities, who meet the qualifying requirements, to save and control their own money without fear of jeopardizing benefits. 
Case Study:
The Situation:
"Sean" was diagnosed with bi-polar disorder and other concerns in his late teens and has struggled with many issues over the years.  One critical issue for him has been, and continues to be, money. He is able to work on a part-time basis, but usually does not work for an extended period of time. Working gives him a sense of purpose, but the fear of exceeding the $2,000 limit and losing his government benefits causes a great deal of anxiety. To maintain eligibility for monthly Supplemental Security Income (SSI), an individual cannot have more than $2000 of resources in his name. When he has had income, he often saved that money but if the balance crept up to the $2,000 limit, he would become very anxious and quit his job.  His therapist wants to be sure that he continues to work and does not depend solely on government benefits since then he becomes hyper-focused on not earning any money.  
The Options we Considered:
One option for Sean could be to fund a 1st party supplemental needs trust (SNT) and put his money in this account. But the expense involved in creating, managing and reporting for this trust account is substantial when compared to amount of money that will be in the account.  In addition, money in the trust could not be used to pay for rent or utilities. 
Another option would be to make sure that Sean spent his money each month to stay below the $2,000 limit. The concept of “forced spending” simply does not make any sense.  Spending money in order to reduce savings below the $2,000 limit is referred to as the “Spend Down Process”. 
Sean now has a thrid option: Since his diagnosis was made prior to age 26, he is eligible to open an ABLE account. He could then save his money in this account and use it as needed. 
Prior to the creation of the ABLE account, a Special Needs Trust and the “Spend Down” were the only options.
The Benefits of Using an ABLE Account:
Sean's earnings do not typically exceed $15,000 (2021 limit); therefore technically he could save all of his earnings for future needs.  Practically he will not be able to do so, but he will be able to set aside money for future needs just like every other person! Having the ABLE account could grant Sean some sense of relief, as well as the independence associated with managing his own savings and spending.  The greatest benefit is that he may continue to work without fear of earning too much money. This is very important to his emotional well-being and self-worth.

For more information please visit our resource page, How to use The ABLE (529A)  Account in Special Needs Planning


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual, nor intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. There is no assurance that the techniques and strategies discussed are suitable for all individuals or will yield positive outcomes.

The experiences described here may not be representative of any future experience of our clients, nor considered a recommendation of the advisor's services or abilities or indicate a favorable client experience. Individual results will vary.

Investing involves risk including loss of principal. Prior to investing in an ABLE account, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits available for investments in such state’s ABLE program.