PFA Tips: Using Maryland ABLE (529A Plan) To Gain Independence
Written by Liz Yoder, Certified Financial Planner, Planning Across the Spectrum
One of the best things about a Maryland ABLE account is that it is always owned by the individual with the disability, enabling them to have greater control of and autonomy over their own financial decisions, and empowering their confidence to navigate their own financial lives. In fact, not only can an individual with a disability open the ABLE account and fund the account, but there is no rule against a trust contributing to a ABLE account, giving even more power (back) to the beneficiary.
Who controls the Maryland ABLE account?
An ABLE plan does not have a gatekeeper. Some individuals may still require the support of a representative payee or other person to access and keep track of the transactions within the account. However, that is not the same as having to ask a family member or other custodial support person for money to purchase little things such as a new cell phone, groceries, or painting supplies. With an ABLE account, vacations and sports tickets are attainable without asking permission. ABLE accounts were designed to provide people with money to help them with things that support their health, independence, and quality of life.
The result is that the use of the ABLE account makes it feasible for the individual to express what they would like to do and what they would like for themselves. In other words, the goal is to achieve “supported decision making,” or the ability for someone to not be controlled by guardianship and conservatorship to have some more say in what they want for their lives… while maintaining a structure that provides the necessary support.
The reality is that very few of us live completely independent lives. Support may be required from friends, family members, or professionals. When we look at people living in “connected households,” homes where professional caregivers and other support team members are employed into a network of care, we find multiple individuals surrounding the person to support independence structured in a way that gives the individual power to lead their care, and fire and hire who they want. Where needed, a team of support can help in financial decision making, and a Power of Attorney can still step in to support a person who has higher support needs in making complex decisions. An ABLE plan allows the individual to have more autonomy and empowerment over the core of their financial needs and maintenance.
What is “benefit purgatory”?
For a person who has relied on government benefits and waivers but wants to explore employment and becoming more financially independent, this can feel like a high-stakes risky scenario. Some waiver programs have waitlists, which can be months, years, or decades long. Imagine wanting to work, but fearing if you go off your waivers to keep your income, you may end up back on a waitlist so long there’s no way to get those services and support back. This phenomenon is known as benefit purgatory.
Nonetheless, it’s important to support individuals to get out of the benefit purgatory and grow their employment income and financial stability so that if/when/as they render themselves ineligible for government benefits, they really do have enough to support themselves. Simply put, the financial support from the accumulated value of an ABLE plan can allow someone to take greater risks with employment, to further build their own personal income, and their personal confidence.
Is there a savings cap with Maryland ABLE?
The ABLE account’s design does not allow for unlimited saving. Any money in ABLE account that exceeds $100,000 is counted towards the $2,000 SSI asset limit. Once the person’s assets between the ABLE account and other money go over $102,000, SSI is allowed to freeze, but not terminate the account, until the account goes below $100,000. This is a much higher “asset-based test” than the usual limits for SSI and Medicaid.
Keep in mind that the above rules only apply to SSI. No other disability benefit is impacted when an account balance is over $100k. Many people move from SSI to SSDI, either through benefits from working or through their parents’ benefits earned through paying into the Social Security system. The rule also does not apply to your health or waiver benefits from Medicaid or Medicare.
Maryland ABLE has a maximum account balance of $500,000. Once reached, distributions would need to occur before more contributions can be accepted by the ABLE Program. So far, none of the Maryland ABLE accounts have reached the $500,000 contribution limit since the Program has been in existence. When one does get to $500,000, we hope that the owner of the account has a spending plan so they can continue to deposit once again and continue saving money for their future!
Can Maryland ABLE help with home ownership?
ABLE plans can help people with disabilities build towards personal goals. For instance, owning a home is traditionally both a significant pathway to wealth, and an excluded asset in qualifying for government programs. However, it’s virtually impossible for an individual with disabilities to purchase a home because they’re unable to accumulate a down payment (due to asset tests), nor qualify for a mortgage. An ABLE account can be an amazing opportunity for an individual to save for purchases that are going to be an excluded asset in the future. And if an individual is able to save money for home ownership, that can really help be the catalyst to a life out of the benefit purgatory.
The emotional benefit of a Maryland ABLE account is that the person with a disability gets to save, invest, and spend money much like a person without a disability. Normal. Living normally. Saving like many adults. Investing like smart adults. Spending like every other adult. This is the emotional magic of an ABLE account.