TJ Rodriguez is 36 and cannot walk without a walker, but horse riding helps him build his strength.
So when his birthdays come around, family members help fund his riding lessons, along with other enormous disability-related costs that are a part of the daily routine.
The lessons “are expensive and not covered by Medicaid,” said his brother, Chris Rodriguez, director of public policy for the National Disability Institute. The family pools its money in what is known as an ABLE Account, which is a tax-advantaged investment account designed for individuals with disabilities.
Although seriously disabled people get government benefits through Medicaid and Social Security disability programs, they often incur thousands of dollars in expenses that the programs do not cover. Families might be funding the travel to and from doctor appointments. People with autism or Down syndrome may need special training so they can work.
“Just by living with a disability, people have expenses others don’t have,” said Chris Rodriguez. “They may have to modify their home so they can live there, or they may need to replace a broken wheelchair or a hearing aid.”
Coming up with the out-of-pocket cash is difficult, in part, because the government programs have strict limits on how many assets beneficiaries can have. An individual is not allowed to have more than $2,000 in a checking or saving account at any one time.
ABLE accounts, allowed since 2014, act like Roth IRAs or 529 college savings plans, in that people contribute after-tax money and do not pay taxes on growth if they withdraw it to cover disability-related expenses. There is no age-limit on using the funds, so they can be a valuable tool for long-term planning. But to qualify for an account, an individual has to experience a disability prior to their 26th birthday.
And now families who saved money in a 529 college savings plan can convert that fund into an ABLE. That can be a relief for parents who started saving for a baby and then later discovered autism or another disability that loaded the family with expenses.
Parents, or family members together, can put a total of $15,000 into an ABLE each year. To make sure that SSI and Medicaid coverage is not cut back, families must observe limits on the accounts. Only up to $100,000 in assets held in plans are specifically excluded from the income and asset tests used to determine eligibility.
These accounts help alleviate some worries for parents who fret about how their adult children will handle huge costs after parents die, said Rob Wrubel, a Colorado Springs, Colorado financial planner and author of “Financial Freedom for Special Needs Families.”