The ABLE Plan – (Q & A)

Mar 2017


This past Sunday, March 12, a column titled, “Communication important in these divisive times” was inadvertently published in the printed newspapers and on the paper’s website using my byline and photo. It was not my column. The column was the work of another author with the same last name and the Observer & Eccentric mistakenly attributed it to me. I just wanted to clarify that it was not my column or opinions, and I am sorry about the confusion.

~ Rick Bloom
Dear Rick:
I have a five-year-old grandson with special needs. He has been diagnosed with a variety of issues and will need assistance for the rest of his life. He currently receives assistance from both the state and federal government. I remember reading somewhere that there is a program where I can invest money for my grandson and that it wouldn’t affect his benefits. I asked my financial person about this and he told me he was unaware of any program like that but he recommended an annuity. I am not very good with finances, but when he explained to me how the annuity works, it made no sense to me. My question to you is if there is a program where I can invest money for my grandson and not have it affect his benefits, or was it something that was proposed, and it never went into effect?



 Dear Harold:
First, you are smarter about finances than you give yourself credit for. I agree with you that in this situation an annuity makes no sense. In addition, you are correct that there is a program that allows you to invest money and at the same time preserves the government assistance program. The program you’re referring to is known as ABLE (Achieving a Better Life Experience).
ABLE programs are very similar to 529 Plans which are used to save for a child’s college education. The ABLE plan, also known as a 529A Plan allows you to invest money for a disabled individual and just like in a 529 Plan, all the income grows on a tax deferred basis. When money is withdrawn, the withdrawals are also tax free if the money is used for a qualified purpose. Basically, a qualified expense is anything that would enhance the life of the disabled person; in other words, any expense that helps you improve or maintain health, independence or quality of life. Qualified expenses would include things such as education, housing, transportation, technology and personal assistance as well as employment training and support. There is one caveat in opening these accounts and that is the person must have been disabled before the age of 26.

Unlike a 529 for college where people can have unlimited plans, a disabled individual can only have one account, even though more than one person can contribute into the fund. The total contributions for the year are the annual gift tax exclusion, which is currently $14,000. Just like in a 529 for college, the ABLE plan contributions are invested in set portfolios which you select.

ABLE plans are established by the state and right now there’re only about 18 states that have the program. Lucky for us in Michigan, the state of Michigan does have a plan. The Michigan plan is managed by Prudential and contains Vanguard and DFA funds. The plan does include certain costs but they are very reasonable. To find out more information about the Michigan plan, you can visit their website at

For those of you with special needs children, an ABLE account is something that you should consider. The money in the ABLE account can be accessed at any time and can be used to enhance the life of a special needs child without impacting most of their benefits. These plans are relatively new and the plans do differ from state to state. You’re not limited to the Michigan plan; however, by using the Michigan plan, Michigan residents who file a single return can deduct $5,000 in contributions per year and joint filers can deduct $10,000. Don’t forget, like all investments, it pays to shop around to ensure you’re getting the plan that fits your individual needs.

Good luck!


Rick is a fee-only financial advisor. His website is If you would like Rick to respond to your questions, please email Rick at