Estate planning is a crucial aspect of securing a stable financial future for individuals with disabilities and their families. Among the various tools available, Achieving a Better Life Experience (ABLE) accounts have emerged as a valuable resource. ABLE accounts allow individuals with disabilities and their families to save and invest for disability-related expenses in a tax-advantaged manner. In this article, we will explore how ABLE accounts can be effectively utilized as part of a comprehensive estate planning strategy.

Understanding ABLE Accounts

ABLE accounts are tax-advantaged savings accounts designed for individuals with disabilities that typically manifest before age 26. These accounts enable qualified individuals to save and invest funds without jeopardizing their eligibility for certain means-tested government benefits, such as Supplemental Security Income (SSI) and Medicaid.

Key features of ABLE accounts include:

1. Tax Benefits: Contributions to ABLE accounts are made with after-tax dollars, and qualified withdrawals for disability-related expenses are tax-free.

2. Earnings/Growth: Investments within ABLE accounts can grow over time, potentially increasing the account's value and benefits available to the individual.

3. Accessibility: Funds can be withdrawn for various disability-related expenses, including education, housing, transportation, healthcare, and more.

Incorporating ABLE Accounts into Estate Planning

1. Identify Eligible Individuals

Before incorporating ABLE accounts into your estate planning, identify eligible individuals who can benefit from these accounts. Eligibility generally includes individuals who developed a qualifying disability before turning 26 years old.

2. Assess Funding Opportunities

Determine how funds will be contributed to the ABLE account. Contributions can come from the individual with the disability, family members, friends, or even through planned giving and bequests in your estate plan.

3. Establish the ABLE Account

Select an appropriate state-sponsored ABLE program and establish the account in the name of the eligible individual. Ensure compliance with the state's requirements and regulations.

4. Contribute Regularly

Encourage consistent contributions to the ABLE account to maximize its potential growth. Consider contributing the annual maximum allowed by the state, which is subject to change annually based on the federal gift tax exclusion.

5. Designate an Authorized Individual

Appoint someone you trust as an authorized individual or power of attorney to manage the ABLE account if the account holder is unable to do so. This ensures proper management and allocation of funds.

6. Coordinate with Other Estate Planning Tools

Integrate the ABLE account with other estate planning tools such as special needs trusts, wills, and life insurance policies to create a comprehensive strategy that safeguards the individual's financial well-being.

7. Educate Beneficiaries

Educate family members and potential beneficiaries about the ABLE account's purpose, benefits, and how it fits into the overall estate plan. Understanding its functionality can ensure the proper utilization of funds.

8. Regularly Review and Update

Periodically review the ABLE account's performance, contributions, and beneficiary needs. Update the estate plan accordingly to align with changing circumstances and regulations.

Conclusion

Incorporating ABLE accounts into your estate planning strategy can provide invaluable financial benefits for individuals with disabilities while preserving their eligibility for essential government assistance programs. By understanding the nuances of ABLE accounts and how to effectively utilize them, you can optimize the financial security and well-being of your loved ones with disabilities. Consult with The Ala Firm to tailor these strategies to your specific circumstances and needs.