It seems everyone knows about the 529 Plans to save for college and post secondary school training. Now these savings plans can also be used for private school tuition and tutoring at the K-12 level. They are a clever way to have funds grow tax free and save for the education of just about any member of the family, as funds can be transferred between family members.
Now there is a related program for the disabled individual called the 529 Able plan. This plan became operational with the Tax Act of 2017. The purpose of the plan is to allow for disabled individuals and families to save funds to be used for the care and benefit of the differently abled. These funds can be accumulated (up to $100,000) and will not interfere with Medicaid or Social Security Disability eligibility.
529 Plans, our experience
We have saved for our son and daughter’s education in a 529 plan. When they began school we discovered they both have learning differences and neurological differences (our daughter). At the age of thirteen we discovered that her neurological differences were most likely autism and bipolar disorder of childhood. It is not clear to us if she will need these 529 funds for post secondary training. She might not attend college and both of them also qualify for state rehabilitation funding to prepare them for adult life and eventual work. Once we discovered that our children may not be going to college and that they might be eligible for assistance with post secondary training we backed off on the 529 educational savings plans. We made the decision to optimize our retirement savings and concentrated on taxable investment accounts for our remaining funds.
I was pleased to learn that the 529 educational funds can be transferred to a 529 Able plan. Our existing 529 Education funds can be rolled over incrementally to the 529 Able program with my daughter as the beneficiary. Our son is also able for the 529 Able program as he has a documented disability. If a disabled individual earns income the 529 Able account provides a way for them to save some of their income and allow their savings to grow tax free, potentially lowering their income and taxes. This arrangement also has a bearing on their eligibility to retain government benefits. To remain eligible for some types of disability benefits the individual cannot have savings of more than $2000. By transferring her 529 Educational funds to 529 Able fund our daughter’s educational savings can continue to serve her needs in different ways.
Another example:
My friend Kiera has a son who has a deformed hand and hearing loss. Throughout his life he will need updated limb substitutes and hearing aides which are quite expensive. The 529 Able plan is a way to accumulate funds that will grow tax free and be available for assistive technologies throughout this child’s life.
Eligibility requirements for the 529 Able Plan
This program is designed for individuals with a disability that begins before age 26. A person who receives SSI or Social Security Disability payments is automatically eligible. Individuals who are not eligible for SSI or Social Security Disability can still participate in the 529 Able program if they get a certification from a physician. This physician can be a medical doctor, an osteopathic physician, and in some states a chiropractor or optometrist.
California’s program began enrolling individuals in January, 2019.
Here is a link to a site with more information: