Did you know…
Thanks to the 2017 Tax Cuts and Jobs Act and the 2018 ABLE Financial Planning Act, you can now rollover an existing 529 plan into a 529 ABLE account without penalty!
{NEED A REFRESHER ON WHAT AN ABLE ACCOUNT IS AND WHAT IT DOES? CHECK OUT OUR BLOG POST TITLED “ACHIEVING A BETTER LIFE EXPERIENCE (ABLE) ACCOUNTS — THE BASICS.”}
According to the SEC, “a 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs.”
ABLE accounts (529a or ABLE plans) are similar to traditional 529 plans. They “offer tax-free investment growth and tax-free withdrawals when the funds are used to pay for qualified expenses. For ABLE accounts, this includes things like college, job training, and healthcare and financial management.
“In some cases, parents start saving for their child’s college education in a traditional 529 plan, and later learn that the child has a disability. Before now, these parents had limited options, since taking a distribution from the 529 plan to fund an ABLE account would have been considered a non-qualified withdrawal – triggering income tax and a 10% penalty on the earnings portion” (Flynn, 2017).
Now that the penalty for rolling a traditional 529 into a 529 ABLE has been eliminated, you may want to consider whether opening an ABLE Account for your loved one with special needs would be beneficial. Be sure to talk with a trusted advisor before making any changes to your current plan(s).
“ABLE accounts were first introduced in 2014, to help Americans living with disabilities save for education and other living expenses. Prior to the ABLE Act, if a person with a disability earned more than $700 per month, or had $2,000 or more in savings, they risked having to forfeit eligibility for public benefits like Medicaid. Like traditional 529 plans, ABLE accounts offer tax-free investment growth and tax-free withdrawals when the funds are used to pay for qualified expenses. For ABLE accounts, this includes things like college, job training, and healthcare and financial management” (Flynn, 2017).
You can access relevant rollover forms by visiting the ABLE For All Savings Plan website here.
Note: There is an annual $15,000 rollover limit (less the current tax-year ABLE contributions).
HAVE YOU OPENED UP AN ABLE ACCOUNT FOR YOUR SON OR DAUGHTER WITH SPECIAL NEEDS? IF SO, WHAT DO YOU THINK OF IT SO FAR?
IF NOT, WHY NOT? WHAT QUESTIONS OR CONCERNS DO YOU HAVE ABOUT ABLE ACCOUNTS?
SHARE YOUR REACTIONS AND COMMENTS IN THE “LEAVE A REPLY” SECTION BELOW AND WE’LL ATTEMPT TO ADDRESS THEM IN FUTURE POSTS!
Disclosure: The content of this blog post is provided for informational purposes only. It is not intended to be investment advice.