ABLE Account - Explained
What is an ABLE Account?
Written by J. Mance Gordon
Updated at April 19th, 2024
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What is an ABLE Account?
In the United States, an individual below the age of 26 and is diagnosed with a major disability is eligible for an ABLE account. An ABLE account refers to a savings account specifically set up for people who suffer from major disabilities before they turn 26. This type of account is tax-advantages and it accommodates contributions from individuals who desire to support the disabled individual. There are some regulations for the ABLE account. For instance, the maximum amount of money that is permissible in the account for a year is $15,000. Tax cannot be deducted from the account.
How Does an ABLE Account Work?
An individual with a significant disability can open the ABLE account. This account is also called a 529 ABLE or 529A account. The account is designed by the United States to help people suffering from disabilities. ABLE is an acronym for Achieving a Better Life Experience. This programme was enacted in 2014 by Achieving a Better Life Experience Act. Friends, family members or members of the community can make a gift donation into the ABLE account. Contributions from this account relieve individuals suffering from disabilities and the families from enormous expenses that come with living with a disability. Other expenses of the individual can also be catered for with the funds.
ABLE Account vs. Trusts
Before the ABLE account was created through Achieving a Better Life Experience Act of 2014, trusts are ways through which families raise funds for disabled individuals. Trusts and ABLE accounts are not the same, while setting up trusts require the service of a lawyer, ABLE accounts do not. Also, unlike ABLE accounts, trusts are not tax-advantages, they attract fees which might be sometimes high. However, unlike an ABLE account that has the limit of $15, 000 as contribution sit can receive annually, the limit for trusts in many states is $300,000. ABLE accounts generally have more guarantee than trust, in the sense that is a trust is not set up properly, getting funds from it might be difficult.
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