A. 529 ABLE account is a very new (just passed by Congress one year ago) savings vehicle for disabled people that offers the same tax-free growth and tax-free use just like 529 college-savings plans.
Similarities Between 529 ABLE and 529 College Savings Account
Like 529 college savings accounts, you can open a 529 ABLE account at any state that offers it (currently 35 states offer it), make sure you compare costs and investment options. If you live in a state that offers tax incentives (Oregon, Iowa, Missouri, Montana, Nebraska, New York, and Wisconsin), it's advantageous to open in your own state.
Also like 529 college savings accounts, a disabled person or friends or relatives can make one-time or regular contributions to 529 ABLE accounts. The account owner can make decisions on behalf of the disabled individual.
Annual contribution to 529 ABLE is capped at $14,000.
Just like 529 college savings accounts, if 529 ABLE money is not used for qualified expenses, such as education, housing, transportation and employment training, there will be income tax and 10% penalty on the investment gains.
In our next two blog posts, we will discuss differences between 529 ABLE and 529 college saving accounts and differences between 529 ABLE and special-needs trusts.