The first podcast episode of Mom Autism Money starts with the discussion of ABLE Accounts with Paul Curley, CFA.
In the very first episode of Mom Autism Money, Joyce & Brynne sit down with Paul Curley, CFA, Director of Market Research at ISS Marketing. We talk about ABLE Accounts, how they can help disabled individuals and their families manage their finances, and recent legislative efforts to watch in this space.
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Get the full transcript of this episode below:
ABLE Accounts Transcript – Mom Autism Money
[00:00:00] Brynne: Welcome to the very first episode of Mom Autism Money! I’m Brynne. And this is my cohost, Joyce.
to the very first episode of Mom Autism Money where we talk about growing wealth and family. Today, we’re talking to Paul Curley, C F A about ABLE accounts.
Brynne: Now, Paul is the director of savings research over at ISS marketing.
He oversees data, research, events, and digital on 529 plans and ABLE accounts primarily for institutional clients, including running the 529 conference on Amelia Island down in Florida every year. Paul is also actively involved in advocacy efforts around ABLE accounts. And we are super excited to talk to him today.
Alright, let’s get into it. Hi, Paul!
Paul: I’m Paul Curley director of , ABLE and 529 research and oversee data research events and digital, and ABLE’s been a great, great topic and product to add that we’ve been covering now for just over five [00:01:00] years. And one of the key common points and issues that able does solve is just the ability to save over $2,000 without impacting federal benefits there’s that seems to be one of the great starting points that the conversation starts.
And there’s a lot of different sort of real life stories that were seeing that in the, how it helps so many families as well. So.
Brynne: Yeah, definitely. And that $2,000 cap, that’s for primarily for SSI, is that right?
Paul: That is correct. And so of course, it’s great to be able to save more than that.
Say there’s a larger expense, whether it be transportation or health or housing, or, just a larger vehicle purchase. For example, of course, now that we’re getting more towards the tail end of COVID. So people are now moving around and say, Hey, I, I need a vehicle to make transportation or different things that, that really helps the basic living expenses and improves the quality of life.
So it’s a great vehicle for people to save for those larger expenses. And of course, we all know the importance of there being a, like an emergency fund, as well. Other benefits and issues it solves is that amount is pulled out of the [00:02:00] FAFSA calculations. Of course, there’s all the different situations of people getting these stimulus payments.
Of course, that stimulus payment is not being counted towards that $2,000 number for one year. Of course, that being said, it’s the payments are coming in. What do I do with it? Oh, let’s put it into an ABLE account and just solves for just that place of being able to store the money while it will be spent down in due time.
Brynne: Definitely. Definitely. I wanna go over this a little bit more in depth for some of our listeners, because depending on which state you live in, there’s going to be the urgency of having an ABLE account, I feel like it’s going to be like more or less. For example, here in Pennsylvania, I know that we don’t necessarily have to worry about asset tests, which is like your savings and how much you have available in liquid cash.
We don’t have to worry about those for Medicaid eligibility, as much as some people do in other states. So that’s one instance where you might see someone use an ABLE account. They’ll put their savings and [00:03:00] their emergency fund into the ABLE account, and then it will not count towards that asset test and they’re still going to be eligible for Medicaid as long as their income is low enough.
And it’s the same thing with SSI. A lot of people, especially if your kids under 18. You might not qualify for SSI, but if you do, if your income is low enough and you qualify for those SSI benefits, essentially you’re not allowed to build a savings account past $2,000. And if you do, you lose your benefits.
So by building that savings in an ABLE account, you can still qualify for these programs like SSI and Medicaid. And I know for a while, for a couple of years, though, the Department of Education was like, “Oh, we don’t know how we’re going to count able accounts on FAFSA.” And I think it was just in the past year,
that they finally came out and said, you know what, any money that’s stored in an ABLE account it doesn’t count against your kid for FAFSA. So you’ll still qualify for financial aid and stuff, even if you’re building this savings. Does that all sound about right?
Paul: Th there was the, launch of ABLE, which even though [00:04:00] it took four Congresses to even just have the passage of the ABLE act to be passed.
And then of course it passed and then there was all the implementation. So there’s the passage of the act. And then there, the implementation and there really wasn’t even final regs. When the initial plans are launched and, we had a meeting in Chicago with the treasury department.
The treasury department verbally said that later had a note that says okay, we’re all doing our best to get this plan launched as soon as possible. And we’ll take a very beneficial eye, that you’re doing your best, we’re doing our best. And so then it launched. And then of course there was all these other
items and issues that popped up. What about FAFSA? And it’s oh, that’s actually a great question. Let’s figure it out. As these different items come through that there has been a product perspective of let’s launch and let’s repair things along the way, versus it took so long for the past that we don’t want to just wait until the perfect item is available.
We wanted to get it launched. So that, that. Sense for FAFSA. And then of course all the other [00:05:00] programs there as well. And of course, in, in Pennsylvania it’s also good to see it myself being on the Eastern side of the state. And of course Brynne being on the Western side of the state.
So it was great to get the whole state covered from that perspective. But yeah, I obviously in Pennsylvania, there’s pretty much, lo and behold, as from one perspective, there’s only three ways to reduce the state income tax and more or less boiling things down is it’s the 401k, 529s
and ABLE accounts. So from that perspective, those there’s that benefit there, recently of course there was the Senate hearings led by Senator Casey, who’s been talking about the ABLE Age Adjustment Act which is now another kind of key point where the age of onset for the disability needs to take place at the age of 26, not when the account gets opened, it’s just
with age of onset of the disability. And they’re looking to increase that from 26 to 46. So you’re covered on the east side of the state, the west side of the state. And of course the Senate level as well in Pennsylvania, we’re well covered. So for state income tax, it’s like you put the money [00:06:00] in and that money that you put in is removed from the income level.
It grows tax deferred. So as it grows, you don’t get taxed every year, for example. And then when you take the money out for the qualified expenses for housing, transportation, and basic living expenses, as outlined in the plan disclosure, that it’s that it gets taken out federal and state
tax-free, the money that gets put in though is not a deduction for the federal tax. It’s really the gains when distributed.
Brynne: But when you put the money in and then it grows and it gains interest, when you take that money out, as long as it’s for a qualified expense, that won’t be taxed. You won’t be taxed on the gains and the interest, and that’s definitely a good tax benefit for sure.
One of the reasons that some of our listeners might want to open an able account was because they’re saving for college or trying to figure out how to save for college. And ideally, what we would like to see is all of our children have equal access to higher ed. But in reality, we know that’s not always the case.
There’s definitely accommodations and stuff that schools should be making. But [00:07:00] if your child does not take that traditional four year college path, all that money that you’re saving in an ABLE account? It’s not for naught. You can use it for so much more than college, so you can use it to save for their college education.
But then if you get there, you can also use it like you were saying, Paul, for all of these other expenses. Do we want to review some of those qualified withdrawals? They’re really extensive. You can use them pretty much for anything in the disabled person’s
Paul: life. .
The laundry list is in the plan disclosure agreements.
And that’s probably the best source for that, but it’s, what’s intriguing as I speak to you Brynne is say, so you have, let’s just say $20,000 in a 5 29 account. And you move, say 10 over to the able account. You can use the 529 assets to pay for the college, like the tuition portion and the room and books and things like that.
And then there’s the amount that’s in an ABLE account. You can also use that that amount for transportation, for food, for housing, for all the different items that, that may not be covered in that other bucket. And then of course, as you were kind of alluding to before that the amount in the ABLE [00:08:00] account is not included in the FAFSA calculation as well.
So that’s taken out from that perspective. So there’s the like different sort of like strategy plays that, that could be intriguing, from that perspective.
Brynne: Oh, for
sure. I didn’t
even think about that. If you’ve got cash in a 529 , but you don’t need it all for tuition, but you need it all for other living expenses.
You can just do that roll over. That’s so smart.
Paul: Yeah. There’s the rollover dynamic is I think that was implemented maybe three years ago. So as we were saying before, where like ABLE is launched and oh, w what about this aspect? What about that aspect? Yeah so it’s pretty clear in all the different language that you can
roll over the 5 29 assets to the ABLE accounts and then there’s also that the ABLE to Work component, which traditionally the there’s the level of $15,000, that one can put into the ABLE account every year. If the person with a disability does work, you can incrementally save more and put more in to the able account than that $15,000 levels.
So that’s like another interesting feature that was added. Perhaps three years ago,
Brynne: Definitely. And you know what, let’s talk about some of these requirements to [00:09:00] open an account. You mentioned that the disability, the onset has to be at or under age 26 currently. And you were talking with Senator Casey here in Pennsylvania about potentially raising that age.
And I know there’s a lot of people working in the field of politics to try to like, get that age bumped up so it could help a lot more people. So where right now, as things stand, you said that there’s been some progress. Do you know if that’s like going to be at a state to state level or if it will have to be changed at the federal level?
Or how will that work if it turns out?
Paul: The age of onset is 26, so like a 30 year old who’s age of onset was 26 years old. Like that 30 year old would be able to open up the account. Even though they’re over the age of 26, w which is an intriguing, right? So that’d be like a federal bill for the ABLE Age Adjustment Act.
So every state would be able to open an account at a age 40 age of onset at 40, I think. And one of the interesting developments of that [00:10:00] as well is that there would be a lot more veterans. So there’ll be like an estimated, like 1 million more veterans who may have been able to qualify for that, while being in combat between the age of 26 and 46.
That’s an element. I think like another it’s like in the, in that nuts and bolts section is probably that you can only have one. One account per beneficiary and the account owner is the beneficiary. I know for 529s or even a 401k or IRAs, it was like, the account owner, the one person that the of beneficiary would be another person, but for ABLE it’s one person one account rule so you can roll over account and say Hey, I liked the Pennsylvania plan and, but I want to roll over here or vice versa, that’s allowed.
It’s just there being one account. And it was really put into place and say, there’s just people who aren’t talking to each other. So this is perhaps like grandparent or an aunt, or an uncle. And my brother’s in California. So I talk to him, but not as much. And he just says Hey, I want to open the account.
It’s, it’s a lot easier for that gifting element for my brother to say make the contribution versus like him opening up a separate account.
Brynne: Definitely, and [00:11:00] I think that’s a huge thing. Cause a lot of times family wants to help us. But when we’re talking about some of these benefit programs that you rely on, when you are autistic or otherwise disabled family gifting you money, it can be problematic.
Because it disqualifies you from a lot of these programs. So they’re trying to be nice, but they actually caused financial stress in your life. But with this ABLE account, if they contribute to the able account, that’s a nice way for them to be able to give without necessarily messing you up financially, as long as you’re not hitting that $15,000 cap every year.
And that’s one of the other requirements for an ABLE account is right now, currently you can contribute $15,000 per year and that’s per account, correct? That’s not like grandma can gift 15 grand. Dad can gift 15 grand. No, it’s just like the whole account’s 15 grand, except for, whenever the tax cuts and jobs act or whatever you want to call it passed, there was this provision in it called able to work and that able to work allowed certain disabled adults to contribute in excess of that $15,000 [00:12:00] every year, as long as it was money, they were earning from their own employment.
Do you want to explain that a little bit more to listeners who may not be familiar with it? Because I feel like this past and not a whole lot of people knew. And it’s
a big deal.
Paul: The able to work act was quite key because there’s a lot of people who’ve always wanted to work and do different things.
But just weren’t able to work in, in, different roles, different jobs. It’s a great opportunity for people to, go and work right and like accrue more than $2,000. And of course, more than $15,000. And you’re absolutely right. So there’s. When a grandparent gives like 5,000 and another one gives five and then there’s like the aunt or uncle, gives five, it was totally cap of $15,000
but to the extent that the person can work and earn more. And of course it save up more. And now there was, I think in the Senate hearing, there was someone who bought a home where it was like literally impossible, to buy a home with $2,000. And so it’s great that there’s just all these different elements and, to allow people
to work more and it’s a great lifestyle benefit.
For [00:13:00] sure. And so with the able to work act, two questions: how much extra can people put in every year? And what if your kid’s like a high schooler who’s working in a high school job? Do they have to be like the age of majority in the state to qualify for able to work?
Or can they like put in stuff from like their high school afterschool
Paul: Yeah I’ll take the first question and the that’s the high school one. So yeah it’s for anyone, the person can be, eligible and able to work at, I believe in Pennsylvania, it’s 13, 14 years old. And I remember myself working at a movie theater, at 14 and they celebrated when I turned 15.
Cause then I could work later. But yeah, so it’s the high school jobs and that’s a great example, the exact numbers on how much that, that. Is it my, my, my understanding, broadly speaking, I think it’s, $13,000, so it’s quite significant compared to 15 and one can put a lot more than that.
There’s a lot of different nuances. It’s like Alaska has one number another state has another number.
Brynne: Hey guys, it’s post-production Brynne here. So I [00:14:00] looked up these numbers and for able to work, the extra contribution that you’re allowed to make is based on the federal poverty line for the prior year.
So this year we’re sitting in 2021. So we would look at the federal poverty line for a one person household for. 2020. And that’s going to vary based on the state that you live in, like Paul said, so in Alaska it would be $15,950 extra that you could contribute per year. In Hawaii, it would be 14,680 extra dollars that you could contribute.
And in all the other states, it’s going to be $12,760 that you can contribute per year. Now that number is going to change from year to year as the federal poverty line changes. So you would just want to check back on that around tax time every year to try and figure that out. All right, let’s get back to the interview.
Paul: We can go from 15,000 to basically essentially saving 28,000 a year. [00:15:00] It’s quite a good benefit, but of course then you save the amount and you can use it for the qualified expenses, basic living expense. You can earn it and then we’ll spend it down on the basic living expenses and other items.
So it’s a great from that perspective.
definitely. And for like, all of these qualifications are going to, I think they vary or the wording may vary a little bit depending by state, but generally speaking, if you’re like, what are these qualified expenses they’re talking about? I’ve never heard of an able account before.
These are some of the expenses that you can withdraw money from your able account. Again, generally speaking, check with your state plan. You won’t be taxed on the interest that your account has earned so you can take money out for housing costs for the disabled person, transportation costs employment, training, and support, personal support services.
We had a listener ask specifically about that. My kid doesn’t need accommodations, you would expect, but like they are going to need personal support services. Yes. You can pull money out for that. In many instances, healthcare expenses, legal fees, financial management services. [00:16:00] Really there’s a lot of things that it just if it’s related to the person with a disability, it doesn’t have to be related necessarily to the disability for it to be a qualified expense because that disabled person, you can’t separate the person from the disability.
So any expense related to that person counts again within like your state guidelines. Read your plan, but it’s really an incredible amount of expenses that you can use this for.
agree. And of course the best practices, just keep the receipts and that way just have the shoe box or put in the folder and just keep track of it as well as probably
th the best practice, but you’re absolutely right. I think a lot of the, the questions I get, it’s either, there’s the IRS code and of course that’s not very exciting, but it’s, kinda has their kind of like broad lists. That’s very broad in nature. And then there’s also the plan disclosure agreements and those are the two sources that pretty much answer
all the different kinds of questions, like what’s this what’s that, and more or less, a lot of those states fall in line, from that perspective, cause a lot of it [00:17:00] is coming from federal code or different state codes. And if I had a call and someone had a question it’s like, Hey, Paul what’s this.
It’s I’d probably be pulling the code from there. Cause it’s also just, backup and background. And so if you work with an accountant, and it’s I spent this and it says it right here, because perhaps your accountant, isn’t familiar with ABLE which may be the case, but it’s if you hire, when you’re still in the.
The IRS code. It’s like, all right it says right there and here it is. And there it is. And it’s like, all right. So I think that’s a pretty basic straight through process.
Brynne: For sure. Now, a lot of people as they’re going through, I feel like maybe they haven’t used an accountant before maybe their tax situation hasn’t been complex enough or they feel like they just can’t afford it.
When you get into these complex tax situations, you might think I can’t afford an accountant, but like sometimes there’s going to be times, that like it’s worth the investment. Like that person’s going to be able to save you money and make sure you’re above board on all your paperwork. So definitely look into that guys.
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Brynne: Now we were talking about spending down expenses and you had some really exciting news about a lot more states are implementing able accounts with like actual debit cards. So when you go to spend money, it’s super easy and convenient. I’m wondering if you can talk a little bit more about that and any developments that have been happening in that space.
Paul: Yeah, it relates to the like, like which plan is best. A lot of it as I paralleled it, that the best gym is the one that you use. And it’s like to the extent that, all the features, it’s like the bill pass and then the plans are live and then it’s w what makes it easier to do?
And then, yeah, it’s just, there’s there’s people with that FSA cards and debit cards. And of course, with the able accounts, it’s just the ease of use. So just being able to use the debit cards and there’s more and more. Rolling out and I guess maybe it’s a little bit [00:20:00] of inside baseball, but it’s just if you’re thinking about the, there’s the rules and regs around the investment changes allowed, but just to the extent that like a using the debit card does not count as an investment change.
So when we look at the data so far, is that the most people are using the account quite frequently, just like using the debit cards probably about like once every other month. And so there, perhaps like taking a going to the ATM and just taking out say 500, dollars, which is like the average amount being taken out.
So it’s ended up, probably carries someone for two months. And so that’s an intriguing what inside so far, but yeah there’s we’ve been finding been an expansion of number of plans that have debit cards and just making it easier to do versus having to call them up and take the distribution and it’s like having them to request a check or it’s just like the, it’s just great that there’s like a number of plans that adding that functionality just to make using a plan that much easier.
Brynne: No, for sure. For sure. Now there are some things that with able accounts, they make life easier. Just, at least here in Pennsylvania, the first time I heard [00:21:00] about them being available was 2015. So they’re still pretty new. There are a couple of things that you might want to look out for. With able accounts though, one of the big ones, one of the big concerns that we’ve had come up is this issue of Medicaid paybacks , which is essentially if you save money in an ABLE account, and then hopefully in old age, when you pass away or the disabled person passes away after certain expenses are accounted for, then the remainder of the money in the able account actually goes to the state to pay back Medicaid expenses, which is just…
I… that hurts. Not all states do this, at least as I understand it, check me on any of these, if I’m wrong. But I think Florida, California, Maryland, Pennsylvania, and Oregon, I’m pretty sure all of their state plans prohibit those Medicaid paybacks, which is huge. I’m wondering if there’s any other states that have put laws into effect around that, or what if I live in.
Wyoming and I buy a Pennsylvania state plan. Does that [00:22:00] protect me from the Medicaid paybacks or does it matter where I live.
Paul: Yeah. That the clawback provision is quite interesting, cause it was definitely one of those, the first things that we saw. So there was the able age adjustment act, which was a clear, topic.
And the next one was the clawback provision. And so that’s why immediately right out of the bag, California and Oregon and Florida went right out after like those clauses. And there’s no. There’s no reason not to, have more states just do it. So it’s you build a momentum and that’s another thing where, these states, put it in.
And of course we just think it will be a matter of time until it rolls across all the different states. Because we want Pennsylvania Senator Casey to focus on the ABLE age adjustment act and then the next ones the clawback provision. And then we’ll just keep going down.
Knocking down the walls. But in the meantime, we can go to the states and be like, Hey let’s pass that. And just sorta at least for our state take, take care of that provision, but what’s interesting is as well, is that there’s in terms of the tiers of creditors. So it’s like they’re like the last [00:23:00] creditor as well so say someone passes away and there’s let’s just say the phone bill and like all these other expenses.
So those will go first. So like paying off the car loan, the credit card, like all these other items. And so that the clawback provision, would be the last one. And the average account balance right now is $8,000. One would think that would take care of the estate from that perspective, like all those expenses.
And then I’ve yet to actually hear of a state that actually enforced that. Yeah, of course meet me, putting my hat on as Paul Curley, just the independent from my own company kind of perspective, but it’s just no legal liability say that, but I’ve yet to actually hear of a state actually have that actually happen.
It’s there’s the rule in place but which states are actually actively enforcing that one. Cause if you think about the number of just like hurdles that would just need to be lined up to have that take place. But so it, it is like one of those hold back issues that does hold back
people from opening the account. But if we step back and look at the big picture of yes, it’s there at the federal level, but the states are already [00:24:00] taking that away. And then even if it does get implemented, which it rarely does. And I’ve yet to hear, of an actual case, it’s like the last traunch on an account that, that really on the whole isn’t having that much.
It’s it’s but you’re absolutely right. And so it is something where I think that we should all start hammering the phone lines and everything about the, we’re just paralleling it over to the ABLE Age Adjustment Act there’s I believe top of mind, as of July, there’s 10 sponsors on the
Senate side and about, 16 growing up on the house side. So there’s obvious support and traction. And so to the extent that there’s Casey and now Toomey as well or backing, ABLE while he’s still in office, at least for a couple of months, but yeah, an extent that it’s like it is a sticking option.
It is very well regarded. It is a high note of interest with that being said, it is like it is being blocked and tackled by the powers that be.
Brynne: Gotcha. Gotcha. So like for people who have not maybe engaged in [00:25:00] advocacy before, whether for themselves or for their children, with the able account, if we’re talking about Hey, I want my Senator to.
Push the age up to 40. I want them to support that. If you want to let them know that you can call at the federal level, your Senator or Congressman or both. If we’re talking about the Medicaid payback provisions, it sounds like what people might want to do is get more involved at the state level. So your state also has a Congress, right?
It’s a state level legislature, and you can call your state senators and the representatives in your state’s house to try to let them know Hey, this is something I support. I would appreciate it as your constituent, if you supported it too. And I feel like the more, they just know that concerns exist.
I feel like sometimes they just don’t know. So if you can let them know you’re there and that you care and that you’d appreciate it as a voter that, that can help push things forward. If you’re looking for something to do to help make things a little bit better. Now, I mentioned that Pennsylvania might not have that clawback provision.
Was I wrong? Do we still have that for the [00:26:00] Medicaid payback?
Hi, post-production Brynne again. So when we look at the states, there’s a whole bunch where this clawback recovery is totally allowed. Some of those states are we’ll just go through the whole list here, Alaska, Minnesota, Arkansas, Mississippi, Colorado, Montana, Connecticut, Nevada.
DC, a New Jersey, Indiana, North Carolina, Iowa, Rhode Island, Arizona, Georgia, Ohio, Oklahoma, Kentucky, Missouri, South Carolina, Vermont, Wyoming, New Hampshire, New Mexico, Washington state Alabama, Louisiana, Massachusetts, Michigan, New York, Tennessee, and Texas now. The next states I’m about to list are states where either this clawback isn’t allowed at all, or the state has passed a law that severely limits that clawback practice.
For example, in Kansas, if you’re under 55, [00:27:00] when you pass away, The state can’t come at you for the Medicaid money. Also in Kansas, if you’re over 55, they’ll only come for your money if the federal government requires them to by law. So this severely limits the instances where you’ll even have to worry about it.
If you even have enough assets in your account to be worrying about. So those states are Delaware, Kansas, Illinois, Pennsylvania, west, Virginia, Maryland, Oregon, Nebraska, California, Florida, Maine, and Virginia. And I would highly encourage you to just look up what that law looks like in your state. Whether there is a complete ban on the claw back provisions, or if you live in a state like Kansas, where there is technically a clawback provision, but the instances in which it’s going to happen are very few.
All right. Back to the episode.
Paul: Yeah. The, a, this is a photo of me asking Senator Hasson Senator Shaheen went when I [00:28:00] was in new Hampshire lived there, just went to the hill and talk to pass the last bills. Th they love talking able, and, calls and meetings. And, as especially when you do an in state, discussions that they love hearing from their own, groups and bodies.
And they’re definitely open to hearing topics. And of course, now that there is a bill and usually they’ll get staffed up. And when I went to New Hampshire and talked to the house and senators about able they’ve actually helped me get up to speed with the bill. It was only me representing a national down syndrome society.
When I did the buddy walk and California had 50 people. And so there’s a lot of, numbers of house and Senate there but they had 50 people where for me, it was like, blocking and tackling that the whole crew and the four of them. And so it’s a little bit different, but yeah, it’s to the extent that it is a great topic.
It is very well received.
Brynne: Again, you can buy able accounts across state lines. So if I lived in Utah and wanted to buy a plan in Pennsylvania, I could technically do that. How would you suggest that people looking to [00:29:00] potentially open up an able account, compare those maintenance fees and investment related fees and are they large enough that it even matters?
Paul: Yeah. And that’s a great point as well, in terms of looking at plans, the first and foremost that every single regulatory body like reiterates is take a look at the, if your state has a state income tax. State income tax deduction on the contributions in Pennsylvania, we get the,
the state tax deduction, regardless of which able program we use. So it’s less of a topic, but that’s always where the conversation kind of starts there. I think a quick second item is you’re just ease of use, right? So we talked about ease of use, which ones have debit cards, which ones don’t and just which one has a great portal online website, but also just call centers and call centers has become…
they were obviously a very important topic in 2020, but also 2021 in terms of looking, w with the reality of most people in, from working from home environment. But yeah, like right after that and, and what I would typically, but as even the first one is looking at the annual fees, but also the…
there’s also the investment fees. Just like [00:30:00] a HSA account, let’s say for example that some plans have a, let’s just say like a monthly fee of $3. So then over the course of the year, it’ll be $36 for some plans. I go like Ohio, there’s an in-state rate. If you’re not a resident getting Ohio plan, then it’s one rate.
But if you’re from out of state, it’s a different rate, which is actually higher. So it is intriguing. Looking at the, at those monthly fees, it’s probably, like a key item to take a look at, there are plans that, that don’t have the annual fees, but then there’s all that then, plans that, that tend to have lower
Quarterly annual fees, tend to have higher, investment option fees. So there’s, I just think, I’m almost reading directly from MSRB and FINRA rules and regs, but yeah, there’s, it’s like when we need to look at the all-in cost. So there’s like the monthly fees that we may see, or the annual fee has been, and then there’s the like investment fees and one needs to take the whole picture approach on that. The, on the investment fees is it boils down to the what’s shown in this like [00:31:00] box that shows the fee box. The fee table is the total annual asset based fee. With the average account balances of $8,000, the largest feed tends to be the monthly, quarterly or annual fee of $3 versus that investment fee.
But I kind of point people over to the plan disclosures, take a look at three plans as you would with, if you’re getting a plumber, right? You want to look at three different plans and certainly take a look. And it’s not just for 529 or able and investments or, advisors or accountants or lawyers or.
Yeah, the car repair or whatever it may be, it’s just taking a deep look at the three. The investment lineups themselves aren’t very different between plans. And I think that’s done intentionally, like a few plans have those slightly larger investment options. Many of say 14 investment options with Tennessee and some of them have larger ones where, other ones only have four different options.
Like one that’s a money market FDIC insured or something like that. Like your more traditional bank option. And then the three that [00:32:00] are a little bit more market performance related. As a sidebar about that, about a third of the activities is much more like traditional like bank account, FDIC insured bank account, and like two-thirds are more like investment type of longer is a long-term goal or five years.
I want to save for like a transportation vehicle or something with a larger spend. So
definitely a lot of our listeners are parents. So I’m assuming that when your child is under the age of majority in your state, You’re in charge of managing those assets. What happens when your child reaches the age of majority?
Do they automatically assert
control over that?
Paul: I pointed in terms of people like, Hey, find the thing called the plan disclosure agreement or call them up and ask for it. But yeah that the intriguing element for, able accounts is, at that age, 18 in most states. And because the account owner is the account beneficiary that once they turn 18, that they will have control over the account.
And of course there’s [00:33:00] the different ways that to set up the account where there’s the power of attorneys or different things like that. But lo and behold that’s one different element between 529 accounts and different types of trusts where I think they have, they both have different types of qualified expenses.
So they are different different qualified expenses, different costs, obviously saying if a trust is much more expensive. But they do have their benefits as well. But that being said, you can one can structure it so that when the child does turn 18, there’s a little bit more concern around like how to manage the assets, once they do turn age of majority and
things of that nature, but I ideally they’ll be trained up, like the teachings around financial literacy, I’m thinking about my own daughter, Claire. And when I drop her the different books around financial literacy in banking and it’s I, as the world becomes more and more digital, I do think it, it is a concern right, where I, a parent used to be able to walk their child to a bank and explain to them what a bank is and, but where everything’s becoming more virtual in nature, like how do you explain
you know that [00:34:00] element. So
Brynne: For sure. And ethically, I think that’s a real good default. If somebody has money, they should be in control of
their own money.
Paul: Yeah. And yeah, and to circle back to the last question, it was almost like the very basis of able accounts was to allow people to have assets and actually control it.
So obviously the different disability is, very, dramatically, but this is a population where historically they weren’t allowed to have any type of access or training on this topic. And so I think it’s a great item for, to be celebrated to actually let them have more than $2,000 and then manage their own money just to be on the topic.
I, I think that was almost like part of the inner sort of brilliance of it.
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Paul: but yeah. So for the so [00:36:00] the question on the best category.
Brynne: Yeah, definitely. So who has the best, like or are they all equal? Like state tax policies? If you contribute to an ABLE account, you will not have to pay state taxes on the gains or whatever. I know you said Pennsylvania does that, are there, is it like the majority of states that do that or.
Paul: And I’ll
put the, this is my Paul Curley hat a talking shop with Brynne on ABLE accounts, is not representative of ISS at all. But I think that there’s roughly 20 states with different state tax deductions . Of course I’m a little biased cause I’m in Pennsylvania. But yeah.
Being able to get a state tax deduction up to $15,000 for, contributing to the ABLE account is I think as good as it gets, in terms of just hitting that maximum, getting that 15 and then the incremental able to work as well to get that deduction as, as well. So I think, Pennsylvania from that state’s deduction perspective does great by its residents for that.
And it’s for any states able program. But [00:37:00] obviously they, they do a great job and take a look at your own state as well.
Brynne: Yeah, definitely.
Now, are there plans that are easier to use than other states, like where your money is more accessible Would that rely mostly on the availability of debit cards or how does, how would you judge that?
Paul: Yeah, I’d say they’re probably they’re all on equal footing, there’s just thinking out loud from a record keeper kind of perspective that there’s plans that use like leverage a census as their record keeper. You think about Virginia with PNC, of course, flying to Philadelphia international.
They have the PNC bank right there, but BNY Sunday, manages a number of plans. And then for th there’s a number of independent plans as well. So Louisiana has, does all their infrastructure in-house and I think from a ease of use perspective I think maybe that’s a great area of research, what, which ones are easier to use and which ones are a little bit more difficult.
So I think we’ll take a look at that one and maybe that’ll be a powerpoint we’ll work on for next.
Yes. And [00:38:00] other things you’re going to want to look at, are just fees that we talked about availability of debit cards. If there’s a call center available, when you have questions and what those minimum contribution levels are. Now, in your opinion, is there any state that you were like if I lived in that state, I would totally get an out of state plan because these fees are just ridiculous
or because there’s no state tax benefits or is it just like an advantageous thing, if you have it available to you go use it.
Paul: Yeah. What’s I’d probably look at two different things, and it’s really like who’s doing a really cool job. So I, I think about for Massachusetts and they have the fidelity platform.
So when you’re on Fidelity’s platform, it’s oh, here’s my iRA. Here’s my brokerage account and here’s my able account. And it’s all kind of hangs well together in one place. And of course we all have mint.com. I’m sure there’s a new app that does a much better job, but it’s just a highlight like who’s doing great.
And I think Massachusetts is doing a great job. I think certain states [00:39:00] are doing more marketing outreach, just thinking about, whether it be, Virginia doing a great job. in terms of just networking a lot with a lot of local in state populations as does Ohio, th they’re they’ve coined phrase the term windshield time.
So they’re just driving around the whole state, across the whole. Four, four corners of Ohio, and they’re just doing a great job of partnering in state. But then of course there’s a number of states like Ohio that are in a number of other programs as well, doing well, doing good work with the national national kind of groups that it is like thinking about national representation or local representation.
I do know that for Ohio and Massachusetts, for example, that they will just have like this great Like webinars series. So MEFA the general 529/ABLE group does a great webinar series and the podcast series, and to the extent that they’re really driving the needle in terms of who is getting the message out there.
In California, I think, know in California is probably, I think they do 500 events per year in California. So [00:40:00] it’s really thinking about how certain states are really cranking it up and moving the needle. And Florida has a long track record as well, where some states are just a little bit quieter, so it’s just. I would encourage them to do more just because it’s a great vehicle. That’s helping a lot of families and we just we just all need to work together to do a got milk campaign for able to really get the message out there Because it is critical, and that it does help so many families there’s right now the target audiences is 8 million families across the U S that could be using.
Able on a course for the eight adjustment act, it would increase it by 6 million to 14 million, but it’s like to the extent that there’s just needs to be more vocal groups that are, getting the message out there. I think it all kinda bodes well. So I guess I won’t call it the individual states that I wish I was a little bit louder, but I guess it’s the polite way of saying I think if you look at the social media and who’s who has an Instagram account, who has a Twitter account, who has a regular Facebook [00:41:00] webinars series and who do you see out there?
That’s really trying to move the needle to make it happen. Kudos to them.
Brynne: Awesome. Now I do have before I let you go, I have a couple of listener questions. I’m wondering if I can run by you and we’ll see if w we have limited information. We don’t have them here with us today, but we’ll see if based on the information they gave us,
if we have any answers that might be helpful. So this first listener is based out of Texas, and she has a 13 year old son who’s on the spectrum. She anticipates him living independently when he’s grown. She also has a few older children. They’re all like 17 and up. And here’s what she says. She says we’re very low income in a depressed area and only my husband works.
So we get SSI for my son as well. I’m interested in learning how to best save and allocate money for him when he’s grown. And I’m wondering here, if an ABLE, it seems like this is the situation and able account was created for I’m wondering if I might be able to get your thoughts
In that scenario.
Paul: With the limited information. I have, I [00:42:00] think it does make sense to, save up to that and say $1,800, amount just for like just below the $2,000 amount. And of course from there, just start saving more into the able account. And just to once they hit that age of majority, at that point, pivoting that they worked to or at a later age, but at least it will allow them to save up the amounts that, it’ll help that launch, phase of their life.
Brynne: Yeah, definitely. Definitely. And that’s the thing too, is that it will protect your emergency savings or whatever money you want to invest for the future. It will protect it from that SSI up to, is it still up to a hundred thousand dollars? The first hundred grand you save in an ABLE account is sheltered for SSI purposes.
Paul: Yep. And with able being around for five years. There’s finally a handful of accounts that, that max the number every single year. So we’re starting to get to the point where there’s w we may actually have some accounts where they’re hovering that, that level, but obviously it’s easy to monitor, but yeah that that easy glide point up to that hundred thousand [00:43:00] mounts a good kind of point
of focus on so.
All right, let’s move on to our next question. So this is from our next listener. We are currently trying to figure out planning some savings for our younger kids to access, to help our teen, after we pass. The teen has Asperger’s. So probably won’t qualify for SSI SSD, but will need assistance with some executive functioning like housecleaning, remembering to pay bills, grocery shopping, et cetera.
I’m unclear if those costs would be allowable expenses for an ABLE account or what the best route for
Paul: Yeah. And there’s the category, the list of compassionate allowances and there’s the self-authorized letter, from the doctor that would allow someone to open up an able account. Of course. And take a look at the details yourself and make the call yourself.
But I would say that there’s, there’s a couple of different categories of people that can open up the able accounts. And one is SSI SSDI but also the, self authorized letter with the doctor. And there’s a certain process to that where there’s a [00:44:00] certain frequency to to reauthorize like that letter, but the list of compassionate allowances is a great way to you know, tag in and flag, those kind of allowances and of course, on, on whether or not things are qualified.
Yeah. It’s just, take a look at the plan disclosure agreement but it does seem like it would be one that would be qualified. And, but yeah, just take a look at the th the list and there’s probably, I believe there’s a typically category around like services that improve the quality of life.
That otherwise would were it not for the disability, would be be easier to do, something that’s around that language. So again, it will, it could be a help in that.
Brynne: Definitely. So it sounds like yes, but also check with your doctor and perhaps check with an accountant, but it sounds like yes, these costs probably would be qualified expenses.
So an ABLE account might help.
Paul: Yep. Yep.
Brynne: Awesome. Awesome. All right. Now this listener has multiple family members on the spectrum and they also have other disabilities. Qualifying for SSI [00:45:00] is a concern for both one of her adult children and also an adult sibling. So is qualifying for Medicaid, Medicare, and food stamps or snap in her state.
All right. Let’s listen to her question. We are currently struggling with opening an able account or going with a special needs trust. The able account has Medicaid payback, which
talked about before people freak out about it, and it’s scary. And that prevents our daughter and grandchildren from inheriting any
money and the special needs trust does not have a payback.
But the special needs, trust costs so much more to establish and maintain due to keeping up with all the legal changes, something the able group does for you. So it sounds like here, like she’s struggling. She I know that she charges her child and her sibling rent in order to keep them under that SSI limit.
And I think she’s just looking for ways should I go with an able account? Should I go with a special needs trust? How do I best shelter this money So that my sibling and my kid can still get access to the resources they need. And I think that’s a really good [00:46:00] question. This is something that comes up a lot.
Like how do you decide if… opening an ABLE account is cheaper and I think it’s a little, a lot of way easier, but how do you determine, like when you hit a level where that special needs trust might be a better vehicle or like, how do you even think about that?
Paul: Yeah. And it’s, from where I sit in talking with so many different folks about the topic, it really does.
It seems like it’s that they’re almost like two different vehicles meant for two different things. So it’s like what, why not both, because it’s like, they both have great purposes and can be helpful for them. For the family, and it’s I guess just thinking out loud, it’s like if there’s like the, if one was to look at, potentially saving more than a hundred thousand then maybe the special needs trust would be, more beneficial and there’s a number of scenarios where.
Where one or the other kind of works better, but I would kinda think that both maybe like a good option. The trusts are more expensive to set up and to maintain every year. But I think that there are a number of benefits that, that would just make them beneficial as well. [00:47:00] So I guess it is a scenario by scenario perspective.
Cause it’s does someone have neither, and they’re trying to figure out like which one where one or the other, or do they have an ABLE and they’re like learning about special needs, trusts, or do they have a special needs trust? And they’re like learning about ABLE? I think all the right questions are being asked and I would probably like evaluate both It’s like individually, but also is there a ways that, that one can leverage both to maximize the, like the abilities of both?
Brynne: For sure. Yeah, for me honestly, I don’t know this listeners particular financial situation, but if I had enough money that I was worried about Medicaid buybacks… Like you were saying, the average balance is like $8,000. Once you settle in a state for like basic debts, like car payments or like phone bills or whatever, like a lot of that money has gone anyways, but it sounds like this particular listener might have money leftover after all of that.
For me, I am not a financial professional. So check me here, Paul. But I might sit down with a financial [00:48:00] advisor if I was at a point where I was like, okay, I’ve got enough money that my kids are gonna inherit something. If Medicaid doesn’t take it all away from me. Like that might be a signal to me that like it’s time to invest in a financial planner.
If I was just sitting and I was like on SSI, struggling to get by. And like maybe I didn’t have the assets or even the cash on hand to pay for a lawyer to set up a special needs trust. Maybe I would open an ABLE account just because the special needs trust is inaccessible to me. In general, I might sit down with a financial planner because like you were saying, you can do both and they can both be
Paul: Yeah. Me personally I think you captured to judge us, right? If you have $1 and you’re like, I need to, I want to open up an account like trusts aren’t even aren’t in the picture at all. It’s you can open up an able account with a dollar, and then once you get to that critical mass where you start being concerned about oh, I have $75,000, I’m actually concerned about the clawback provisions.
Then it’s then you can take ha have the calls and the valuation with the, w with the attorneys about setting up a [00:49:00] trust. And I believe of course double-check with the plan disclosure agreements, but I think that the legal cost to set up the trust is a qualified expense for the able account.
That could be like one pathway, like you say, about the critical mass in an able then use that to set up the other type of estate planning elements. But, I think that was like the gap that was that. Empty for like before able it’s you only had the wealthy with trusts accounts, with a lot of assets.
And then, and so there’s, there was that gap of like, how do we help families, right? That ha that, that start with a dollar. And my my, my son or daughter is now 15, and they’re going to start working. And then how do we save that, that money. Until they are 18.
And at least to get that financial literacy all started to get them going in a good direction for all. So it’s like, It’s a good, great product and, definitely utilize both, but I think that would be a good starting spot
Brynne: for sure. That’s so smart to use the able account to save up, to pay for the expense of [00:50:00] the special needs trust.
I don’t know why I didn’t think of that, but that’s a genius. That’s a genius plan. So I guess that’s all of our listener questions. I have a quick question. As people are like, they’ve listened to us today. Talk about able accounts. They’re like, yes, this will be awesome for my kid. Yes. This will be awesome for my family.
We’d be able to actually build an emergency fund for the first time ever without losing access to our benefits. What’s the first step like for me? I used the able national resource center, a lot to compare the different accounts. I don’t know if that’s a good resource or if you would recommend the people go directly to their state’s able account website or how should people shop around, how should people start this process of actually opening an account?
Because I think it’s pretty easy if you know where to go.
Paul: Yeah. And there’s probably like three different places to go. Why don’t we be at NDI? National disability Institute has their comparison tool. Of course, there’s the law of three look at three plans, like a, your own state plan one that you may have heard about or learned about able to, whether it be [00:51:00] the webinars or different.
The things that they’re engaged and prompts like a neighboring plan or one you may hear about an industry and the third spot would be to contact Brynne. So contact her engage, her check out her website. I’m pretty sure you have a blog on that one and just engage. And I guess of course that, that fourth item is just that closing point.
Yeah. Obviously, as we all come together to champion that the, both in DC, but also. Within the state Capitol together. And w we’ll get there together and it’s a long road. We’ve got, it took a long time to get to where we are today. We’re obviously there’s a lot of things pivoting over time.
So in the meantime, I’m actually closing thought would be to contact Brynne continue to listen. I thank you so much for your time today, Brynne and if I could help out let me know.
Brynne: Oh, definitely.
Definitely. And thank you so much for joining us today and sharing all of your expertise. We’ll be following all of your efforts and are super excited.
We’ll keep in touch about any advocacy work that kind [00:52:00] of turns the corner and changes the law for the better. (swoosh noise)
That was amazing. I really enjoyed talking to Paul for me like some big takeaways were I never thought of putting my sav– if I wanted to open a special needs trust, I never thought of putting my savings for that inside of an able account to shelter it and get those tax advantages.
So that’s a big thing I’m taking away. Also as a Pennsylvania resident, I’m super excited to look at all of these tax saving options. Like it can actually literally reduce the amount of taxes that you owe to the state at the end of every tax year.
Joyce: It was good information. I learned a lot. I am going to open one and I think I’m going to share that process
you all if you want.
Brynne: Yeah, definitely. We’ll get like a video of Joyce opening up her able account. It’ll be awesome. It’ll be really good. And yeah, we just really encourage you guys to check into it and open one up because [00:53:00] odds are the advantages of opening one of these accounts are just. They’re really incredible. And you can pull out expenses for almost anything.
Joyce: We also found that the state can take some of the money. And then we learned that not in Pennsylvania.
Brynne: Yeah. Not in Pennsylvania. And there’s like half of the state a little less than half the states that offer able accounts. They do have some protective laws about that Medicaid clawback provision. And that’s a huge thing.
And I also appreciated how. Most people who have an ABLE account, they don’t have enough money in there to even be worried about there being anything left over for the state to take. So don’t let that stop you from opening an account because it’s only something to worry about. If you start really getting up there.
And at that point, you can just talk about getting a trust with a lawyer. Like the one we’re going to talk to next week. And the show notes, we’re going to put up a link from the national disability Institute. They have a website called the able national resource center. And that’s what Paul was talking about, where you can go in [00:54:00] and compare three different accounts.
We’re also going to encourage you guys to check out the show notes. We have a private Facebook community that you can join, and we just talk about all kinds of money stuff in there. Different life hacks you can use to make your finances better as the parent of an autistic child, we also would love if you visited our website, MomAutismMoney.com and there you’ll be able to subscribe to our newsletter to make sure you stay up on the latest and greatest news about the podcast.
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