COLLEGE SAVINGS 101

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Coming soon to a state near you: tax-free investment accounts for those with disabilities.
http://www.savingforcollege.com/articles/tax-free-investment-accounts-for-those-with-disabilities

Posted: 2013-09-25

by Joseph Hurley

Financial Professional Content

Does our country need another state-operated investment program that works just like a 529 college-savings plan, but allows tax-free distributions to be used to pay the expenses of individuals with disabilities? Yes! According to many in Congress, as well as a large number of organizations supporting and assisting these individuals and their families, that is exactly what we need.

This could be a big deal. Will you be ready and able to advise families if—or more likely, when—the new investments come on line?

Bills in the 113th Congress to adopt the Achieving a Better Life Experience (“ABLE”) Act have gained substantial momentum. House Bill 647 was reintroduced earlier this year by Rep. Ander Crenshaw (R-FL) and has 256 co-sponsors, while Senate Bill 313 was reintroduced by Sen. Bob Casey (D-PA) and has 44 co-sponsors.

The ABLE Act would permit states to establish 529-ABLE programs to accept and invest contributions for individuals with disabilities, and to make federally tax-free distributions when used for a broad category of expenses incurred by an eligible beneficiary. Qualified expenses would include education, housing (including purchase of a primary residence), transportation (including the purchase and modification of vehicles), employment support, health and wellness, and other items.

An eligible beneficiary is any individual receiving supplemental security income payments or disability benefits under Title II of the Social Security Act, or any individual who is blind or who has a medically determined mental or physical impairment, which results in marked and severe functional limitations expected to result in death or last for a continuous period of at least 12 months, and who provides a copy of their diagnosis signed by a doctor.

Just about all of the other rules under Section 529 for college-savings accounts, including the generous contribution limitations, would apply to ABLE accounts.

Why is Congress looking to the states to be providers of ABLE programs? Apparently, it is because the states have demonstrated success with their college-savings programs and because the administrative/investment mechanisms are already in place.

The next question is whether states will actually accept the challenge and offer a plan if/when ABLE is enacted. The answer is that some states will and some will not (at least not for a while). The investment industry supporting and managing 529 plans generally appears to be in favor of ABLE and the opportunity it provides for billions of dollars in asset gathering and investment.

Keep your eyes out for ABLE.

Financial Professional Content

Does our country need another state-operated investment program that works just like a 529 college-savings plan, but allows tax-free distributions to be used to pay the expenses of individuals with disabilities? Yes! According to many in Congress, as well as a large number of organizations supporting and assisting these individuals and their families, that is exactly what we need.

This could be a big deal. Will you be ready and able to advise families if—or more likely, when—the new investments come on line?

Bills in the 113th Congress to adopt the Achieving a Better Life Experience (“ABLE”) Act have gained substantial momentum. House Bill 647 was reintroduced earlier this year by Rep. Ander Crenshaw (R-FL) and has 256 co-sponsors, while Senate Bill 313 was reintroduced by Sen. Bob Casey (D-PA) and has 44 co-sponsors.

The ABLE Act would permit states to establish 529-ABLE programs to accept and invest contributions for individuals with disabilities, and to make federally tax-free distributions when used for a broad category of expenses incurred by an eligible beneficiary. Qualified expenses would include education, housing (including purchase of a primary residence), transportation (including the purchase and modification of vehicles), employment support, health and wellness, and other items.

An eligible beneficiary is any individual receiving supplemental security income payments or disability benefits under Title II of the Social Security Act, or any individual who is blind or who has a medically determined mental or physical impairment, which results in marked and severe functional limitations expected to result in death or last for a continuous period of at least 12 months, and who provides a copy of their diagnosis signed by a doctor.

Just about all of the other rules under Section 529 for college-savings accounts, including the generous contribution limitations, would apply to ABLE accounts.

Why is Congress looking to the states to be providers of ABLE programs? Apparently, it is because the states have demonstrated success with their college-savings programs and because the administrative/investment mechanisms are already in place.

The next question is whether states will actually accept the challenge and offer a plan if/when ABLE is enacted. The answer is that some states will and some will not (at least not for a while). The investment industry supporting and managing 529 plans generally appears to be in favor of ABLE and the opportunity it provides for billions of dollars in asset gathering and investment.

Keep your eyes out for ABLE.

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