New Tax-Friendly Savings Plan for Families of Children with Disabilities

The Achieving a Better Life Experience Act, known as the ABLE Act, was designed to better help families care for family members with disabilities. The bill, signed into law by President Obama, allows families to create tax-free savings accounts in order to help them finance the costs incurred when caring for family members with special needs. ABLE is similar to educational savings plans that allow families to save money for college tuition. It is estimated by the National Disability Institute that there are 58 million individuals with disabilities in the US and ABLE will help them save money should they qualify for an account.

Once ABLE is fully enacted, families will be able to save money in accounts without having to pay taxes on the earnings. The way the previous law was set up, there was a limit on the amount that families could accrue in savings before losing certain federal benefits. Typically, if a family saved more than $2,000 in a savings account they were at risk of losing public benefits like SSI and Medicaid. This discouraged them from saving for future medical expenses. The new law will remove this obstacle so parents can deal with the long-term healthcare needs of their children.

While the law may eventually differ by state, the plan will cover any child that was disabled before the age of 26 and will not affect Medicaid eligibility. For parents of children with disabilities like cerebral palsy, this will help them plan for future care which can include expenses like housing, transportation, assistive technology, personal support services and even legal fees.