Advisers to start recommending ABLE plans to clients

Four states introduce accounts that help families save for special needs children

Jun 29, 2016 @ 12:41 pm

By Liz Skinner

+ Zoom

Financial advisers who specialize in helping families care for children with special needs see the newly available ABLE investment accounts as an important savings vehicle for parents to provide day-to-day and long-term care of a disabled child.

Four different ABLE plans will be available by this Friday, and more are being introduced by other states before the end of this year.

Money in these Achieving a Better Life Experience accounts, which can be opened for anyone who has been diagnosed as disabled by age 26, grows tax free and can be used for everything from medicine to equipment that helps with mobility.

“This is an issue near and dear to my heart, as I have a three-and-a-half-year-old daughter, Ella, who has Down Syndrome,” said Kevin Yurko, an adviser with Wealth Strategies & Management. “I will be talking to clients about deploying these accounts and looking to open one for Ella.”

Advisers envision ABLE accounts working in tandem with supplemental needs trusts, the most common vehicle families use today to save for an individual with disabilities without endangering their right to government benefits.

Ohio launched the first ABLE plan earlier this month, Tennessee followed a couple weeks later. Nebraska's plan will be available starting Thursday, and Florida's accounts will be offered starting Friday.

A person doesn't have to live in the state offering the accounts to open one, but only one ABLE account can be opened per special needs child (though multiple people can contribute to the one account).

(More: States working on new savings accounts for disabled families)

A maximum of $14,000 can be saved in the account each year without jeopardizing eligibility for government benefits, most notably, Supplemental Security Income. Traditionally if someone is able to save for themselves they risk being disqualified for SSI and Medicaid if they have more than $2,000 in their name.

Mary Anne Ehlert, chief executive of Ehlert Financial Group, said she will recommend clients open ABLE plans after they have a trust created.

“If they think an ABLE plan is going to replace a trust, that's a mistake,” she said. “When we quantify how much they'll need to save for the future, you won't be able to save enough in that account.”

There are some quirks advisers warn parents about with the ABLE plans.

First, if the plan contains more than $100,000, SSI benefits will be suspended until some of the funds are drawn down. That limit doesn't apply to Medicaid benefits, Ms. Ehlert said.

Also, the ABLE plans can't be funded with life insurance, a common practice with supplemental needs trusts, which are often set up to provide care for a disabled child if something happens to the parents or guardians, Mr. Yurko said.

ABLE plans were approved by Congress in December 2014 under section 529A of the Internal Revenue Service code, and are treated for tax purposes similarly to 529 college savings plans. 


What do you think?

View comments

Recommended for you

Featured video


John Hancock's Andrew Arnott: Why quantitative investing is seeing a resurgence

Quantitative investing is an approach that has been around for a long time and never really went away, but several factors are making it even more popular now, according to Andrew Arnott, CEO of John Hancock Investments.

Latest news & opinion

The appeal and pitfalls of holding unconventional assets in retirement accounts

While non-traditional asset classes held in individual retirement accounts may have return and portfolio diversification benefits, there are "unique complexities" that limit their value for most investors.

Wells Fargo's move to boost signing bonuses could give it a lift

Wirehouse is seen as trying to shore up adviser ranks that took a hit after banking scandal

New Jersey fines David Lerner Associates for nontraded REIT sales

Firm will pay $650,000 for suitability, compliance and books and records violations.

Report predicts $400 trillion retirement savings gap by 2050

Shortfall driven by longer life spans and disappointing investment returns.

Wells Fargo will ramp up spending to lure brokers

Wirehouse, after losing 400 brokers in first quarter, is bucking trend among rivals who have said they are going to cut back on spending big bucks recruiting veteran advisers


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print