Quantcast

Investments

Presented by MidAmerica Financial Resources. You can reach them at 618.548.4777 or greg.malan@lpl.com or on the web at www.mid-america.us

 

ABLE Accounts for Loved Ones with Disabilities

ABLE Accounts for Loved Ones with Disabilities

More families should know about these tax-advantaged savings vehicles.

Provided by MidAmerica Financial Resources

 

Families with special needs children have a new tax-deferred savings option. The ABLE account, also called a 529A savings account, is patterned after the popular 529 savings plan, created to help parents save for a child’s higher education. Like 529 plans, ABLE accounts are run by states rather than the federal government. These plans emerged after the passage of the Achieving a Better Life Experience (ABLE) Act in 2014.1

 

ABLE accounts address an underpublicized financial need. While some families open college savings accounts, comparatively few start discrete savings accounts or trusts for children with disabilities. That difference may be partly due to the presumption that “the money will be there” when the child becomes an adult.

 

The money may not be there; at least, not as much of it as many families hope. State agencies and nonprofit groups helping the disabled face ongoing funding challenges, including pressure to limit the “entitlements” they distribute. Social Security, which provides Supplemental Security Income (SSI) to millions of disabled adults, faces its own set of issues.

 

Financially and legally, what changes when a child with special needs turns 18? As an adult, a disabled person becomes eligible for Medicaid and monthly SSI payments, provided they meet the financial requirements, typically only available to those with $2,000 or less in assets. Some special needs adults have more than $2,000 in assets in their name by age 18. Savings accumulate, family gifts and investments are made on behalf of the child, and suddenly, that young person is ineligible for fundamental health care and income benefits.2

 

ABLE accounts nicely address this dilemma. Money accumulated in a tax-advantaged ABLE account does not count toward that $2,000 total. Even if funds in the account exceed $100,000, the account beneficiary will still be eligible for Medicaid (albeit, ineligible for SSI).1

 

How large can an ABLE account become? Current ABLE account maximums range from $235,000 to $529,000 (limits vary per state). Account contributions can be made by anyone.1,3

 

What if the state you live in has no ABLE accounts? Consider opening an account in another state. Some states allow out-of-state residents to participate in their ABLE programs. (It is also worth noting that some states have lower ABLE account fees than other states.)1,3

 

ABLE account holders have some new options, thanks to federal tax reform. The Tax Cuts and Jobs Act of 2017 brought notable changes for these accounts. While the basic annual account contribution limit is currently $15,000 for an individual, working ABLE account holders may now contribute employment income to their accounts in excess of that $15,000 threshold, up to the individual federal poverty level set for the preceding calendar year. In addition, some ABLE account beneficiaries may be eligible for the Saver’s Credit, a sizable federal tax break.1

 

You may now roll over up to $15,000 from a standard 529 plan into an ABLE account. One key condition must be met: the beneficiary of the standard 529 plan must either be the same person who is the beneficiary of the ABLE account or a member of the same family as the ABLE account holder.1

 

ABLE accounts are becoming an important component of special needs planning. The word worth emphasizing here is “component.” The money in an ABLE account alone may not be enough to cover lifetime care expenses for a disabled adult, even if the account is replenished. An ABLE account is usually not a financial “answer” for families with mentally or physically challenged children, but a part of a greater financial strategy that might include a supplemental needs trust or other savings vehicles.

 

These accounts do have their shortcomings. The biggest drawback of ABLE accounts is that they do nothing for people who become disabled after age 26. You cannot open one for someone older than 26, unless the individual became disabled prior to reaching that age. Another little-known demerit: states sponsoring ABLE accounts can seek repayment from those accounts for the cost of care covered by Medicaid if the beneficiary dies.1,3

 

ABLE account contributions are not tax-deductible at the federal level (some states do permit deductions). This tradeoff is made in exchange for tax-deferred earnings and tax-free withdrawals. Withdrawals go untaxed, so long as the money is spent on “qualified disability expenses,” which can range from education, housing, and transportation costs to job training and health care. Nonqualified withdrawals, naturally, are taxable.1

 

The bottom line? ABLE accounts give families with children who have special needs a new way to save and invest for future needs and expenses.

 

MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@lpl.com www.mid-america.us

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate.

Participating in an ABLE account may involve investment risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful. Carefully consider a portfolio’s level of risk, charges, and expenses before investing. Read the program’s official disclosure statement and applicable prospectuses, which contain this and other information about the investment options, underlying investments, and investment company. Before investing in an ABLE plan, consider whether your state offers an ABLE program that provides residents with favorable state tax benefits. Consult a tax professional for more information. ABLE accounts may be protected from creditors if

you invest in your own state’s program, depending on the state.

Securities and advisory services offered through LPL Financial, a Registered Investment Adviser, Member FINRA/SIPC.
MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to LPL.

 

Citations.

1 – finra.org/investors/able-accounts-529-savings-plans [1/23/20]

2 – mn.db101.org/mn/situations/youthanddisability/benefitsforyoungpeople/program2c.htm [1/17/20]

3 – ablenrc.org/what-is-able/what-are-able-acounts/ [1/23/20]

Investing for Impact

Investing for Impact
Socially responsible investment strategies and you.

Provided by MidAmerica Financial Resources

 

SRI (Socially Responsible Investing), Impact Investing, and ESG (Environmental, Social, and Governance) Investing belong to a growing category of investment choices that use traditional investing practices to responsibly impact society.

In the past, these investment strategies were viewed as too restrictive for most investors. But over time, improved evaluative data and competitive returns have pushed these strategies into the mainstream. Even though SRI, ESG investing, and impact investing share many similarities, they differ in some fundamental ways. Read on to learn more.1

 

ESG Investing assesses how specific criteria of an investment, such as its environmental, social, and governance practices, may impact its performance. These factors are used in an evaluative capacity. In the United States alone, there are more than 350 ESG mutual funds and ETFs available.2,3,4

 

SRI (Socially Responsible Investing) uses criteria from ESG investing to actively eliminate or select investments according to ethical guidelines. SRI investors may use ESG factors to apply negative or positive screens when choosing how to build their portfolio. For example, an investor may wish to allocate a portion of their portfolio to companies that contribute to charitable causes. In the U.S., more than 12 trillion dollars are currently invested according to SRI strategies.4,5

 

Impact Investing or thematic investing differs from the two above. The main goal of impact investing is to secure a positive outcome regardless of profit. For example, an impact investor may use ESG criteria to find and invest in a company dedicated to the development of a cure for cancer despite whether success is guaranteed.6

 

The biggest take away? There have never been more choices for keeping your investments aligned with your personal beliefs. But no matter how you decide to structure your investments, don’t forget it’s always a smart move to speak with your financial professional before making a major change.

 

MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@lpl.com www.mid-america.us

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities and advisory services offered through LPL Financial, a Registered Investment Adviser, Member FINRA/SIPC.
MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to LPL.

Citations.

1 – https://investor.vanguard.com/investing/esg/ [01/01/2020]

2 – Investing in mutual funds is subject to risk and potential loss of principal. There is no assurance or certainty that any investment or strategy will be successful in meeting its objectives. Investors should consider the investment objectives, risks, charges, and expenses of the fund carefully before investing. The prospectus contains this and other information about the funds. Contact the fund company directly or your financial professional to obtain a prospectus, which should be read carefully before investing or sending money.

3 – Exchange Traded Funds (ETFs) are subject to market and the risks of their underlying securities. Some ETFs may involve international risks, which include differences in financial reporting standards, currency exchange rates, political risk unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. ETFs that focus on a small universe of securities may be subject to more market volatility as well as the specific risks that accompany the sector, region or group. An ETFs trading price may be at a premium or discount to the net asset value of the underlying securities.

4 – https://www.morningstar.com/content/dam/marketing/shared/pdfs/sustainability/Sustainable_Funds_Landscape_2018.pdf?cid=EMQ_ [02/04/2019]

5 – Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.

6 – https://www.ussif.org/sribasics [08/02/2019]

Business News