If you have a young family member who has a disability, there is no doubt you have worried about their future financial security. Since that is the case, 2020 may be a good time to open an Ohio STABLE account.

In 2014, the federal government enacted the Stephen Beck, Jr. Achieving Better Life Experience Act, creating ABLE accounts, as they are known nationally. ABLE accounts are state-sponsored, tax-advantaged savings programs similar to 529 college savings plans. They allow persons with special needs and their families to save up to $15,000 a year, or more if the person with a disability is employed at a workplace that does not offer a 401(k) or other retirement program.

Ohio quickly became one of 42 states to enact its own version of the law – STABLE.

Who qualifies for a STABLE account?

To qualify, a person must have a disability diagnosed before age 26, receive Social Security benefits, or meet Social Security’s definition of functional limitations. Funds from a STABLE account can be used for any disability-related expense, including education, housing, transportation, assistive technology, job training, and health care.

Tax-free earnings and withdrawals

Contributions to STABLE accounts come from after-tax income, but earnings growth and qualified withdrawals are tax free.

There are additional benefits for Ohio residents. If you are an Ohio taxpayer, you can take a state income tax deduction of up to $4,000 for each STABLE account you contribute to, with unlimited carry forward. In other words, if you contribute more than $4,000 to a STABLE account in a calendar year, you can carry the remainder of your contributions forward to subsequent years until your entire contribution has been fully deducted.

It is important to note that STABLE or ABLE savers need not live in the state in which they have an account, and the rules around these accounts vary among states. So if out-of-state grandparents or other relatives wish to establish an account to benefit your child, they may do so either in Ohio or their home state. However, under the federal law a person with a disability may be a beneficiary of only one ABLE or STABLE account.

No impact on Medicaid or SSI eligibility

Notably, a STABLE account may grow to $100,000 without jeopardizing access to government assistance. For example, if you have $5,000 in your STABLE Account, that $5,000 does not count as an asset when determining eligibility for Supplemental Security Income (SSI) or Medicaid. Before STABLE accounts, persons with disabilities and their families were discouraged from saving too much because having more than $2,000 in cash or investments could mean a reduction or loss of critical benefits like Medicaid or SSI.

Because of their low setup costs, STABLE or ABLE accounts are a more realistic way to save than creating a special needs trust for many families. However, they have been slow to catch on. Nationally, fewer than 1 percent of persons with disabilities who qualify have ABLE accounts, according to the ABLE National Resource Center.

Pre-loaded debit card

An additional benefit for Ohio STABLE account holders is the ability to obtain a debit card on which you can load an amount of your choice from your STABLE account. Only funds from your STABLE account can be loaded on the card, making it easier to track withdrawals and expenditures and to avoid commingling personal funds.

If you are the Authorized Legal Representative for an individual with a disability, you can obtain the primary card for your use and a companion card for the beneficiary of the account. A discrete loading feature allows you to limit the funds the beneficiary can access at any given time.

To learn more, contact our advisors or visit the ABLE National Resource Center at www.ABLEnrc.org, or the Ohio Stable Account website.

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