FINANCIAL PLANNING to attend college , the 529 money was held hostage by taxes and penalties .
The tax legislation that passed earlier this year addressed these two concerns . The new legislation now allows individuals with disabilities , who are working , to save an additional $ 12,060 ( federal poverty level ) per year in an ABLE account above the $ 15,000 for a total of $ 27,060 . This is a great victory , but it comes with possible landmines . It will be the responsibility of the ABLE account holders to account the contributions to an ABLE account , and Social Security and Medicaid will view contributions from earned income differently than other additions . Mistakes made could be very costly because government benefits are at risk .
Disability advocates are concerned with how the law was written and how mismanagement of contributions could cause individuals to lose life-sustaining government benefits . Chris Rodriguez , director of public policy at the National Disability Institute , said , “ To the best of my knowledge , ABLE programs are not currently implementing this provision of the tax law due to this uncertainty and need for clarification .” When I see this concern , it continues to build my resolve that everyone with a disability needs a plan for the future , and they need people and professionals involved in that plan , so they have the proper supports so mistakes can be avoided .
The second concern is more straightforward . With the passage of the new tax laws , families who started 529 college plans for their children with special needs now have the option to roll those assets into an ABLE account without penalty ! This is a great victory for many families because , before this legislation , families considered a 529 a “ lost ” account unless they wanted to withdraw the money and accept taxes and penalties , which for some could ravage the value of the account by nearly 40 percent ! If you have
a 529 account and want to roll over the money to an ABLE account , please call the state ABLE account you would like to use to ask if they accept those rollovers at this time . As with any new legislation , it takes time for the laws to be implemented so they are usable . Again , please think through this decision because if you have other children who may attend college , you can change the beneficiary on the 529 to that child to help pay their tuition . This may be a better choice depending on your overall financial situation , and because the ABLE Act still includes payback to Medicaid at the end of your child ’ s life .
As with any changes in the laws , you should consult your professional special needs planner to ensure you navigate them correctly and that your intent will become the reality !
For more information on how to prepare for the future , be sure to contact a financial advisor who specializes in serving families with special needs . A Special Needs Plan is driven by their purpose of Leading Families to Independence through an on-going multi-generational plan . A Special Needs Plan is passionate about families confidently moving forward .
101 N . McDowell Street , Suite 120 Charlotte , NC 28204moving co 704-326-7910 http :// www . aspecialneedsplan . com
Ryan F . Platt , MBA , ChFC , ChSNC , is a registered representative of and offers securities , investment advisory , and financial planning through MML Investors Services , LLC , member SIPC . A Special Needs Plan is not a subsidiary or affiliate of MML Investors Services , LLC , or its affiliated companies . This article is not a recommendation or endorsement of any products .
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