Understanding ABLE Accounts With Matt Syverson

What's most important to you when it comes to choosing your financial advisor? Someone who's aligned with your biblical values. How about someone who will take the time to explain your options? Certified Kingdom Advisors are professionals who meet high standards in competence and integrity and have been trained to offer biblical financial advice.

To find a Certified Kingdom Advisor in your area, visit faithfi.com and click Find a CKA. Folks struggling to care for family members with serious disabilities have a powerful tool to help with expenses. Hi, I'm Rob West. That tool is called the ABLE account, an acronym for Achieving a Better Life Experience. Matt Severson joins us today with everything you need to know about ABLE accounts. Then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is faith and finance, biblical wisdom for your financial journey. Well, it's a pleasure to welcome Matt Severson to the program. For the first time, Matt's a Certified Financial Planner and a Certified Kingdom Advisor in Overland Park, Kansas. He's also a specialist in helping families understand and set up ABLE accounts. Matt, great to have you with us. Thanks so much, Rob. It's an honor to be here and share this important information about ABLE accounts.

Yeah, it is important and often, I think, misunderstood or even unknown. So I'm looking forward to diving into this. These are similar, Matt, to 529 education savings accounts as far as contributions and taxes go, right? That's exactly right, Rob.

In fact, in the early days, they were called 529-A plans, and the A stands for ABLE, Achieving a Better Life Experience. But they're like a sister account that operates very similarly, but for different purposes. Yes. So explain that. What does that then mean to listeners in terms of how they work?

Sure. So if you have a child or an adult with permanent disabilities that has been on government assistance, you know that they are typically constrained to $2,000 worth of assets and get currently about $940 a month from the government through what's called supplemental security income. Well, for most of your listeners, it's hard to live on $943 a month and $2,000 of assets the rest of your life. So the ABLE account allows you to pay for anything that's needed for the person with disabilities pretty much regardless of the need. So it's far expanded beyond education alone, which is the 529 plans are typically constrained to. Yeah. And basically, this helps to fight against the way the financial system has been built with regard to people that have disabilities, right? Correct. People with disabilities might be absolutely able to work and be an active participant in the community, yet they've been impoverished and have to virtually spend everything that comes in, which may or may not be for their benefit. So this provides this opens up the door to be able to work and have a productive life if they're ABLE, using the ABLE account to put their excess income into and others can support them through this without jeopardizing their monthly government income. Yeah.

Okay. So this is for folks on supplemental security income, as you said, around $900 a month and less than $2,000 in assets. So this does not affect that $2,000 asset limit. Now, how much can folks who are funding these accounts for a disabled person put in per year?

Yeah, great question. So up to $18,000 per year is the new number. That's the amount that you can contribute to the account. It also happens to be the amount you can gift to anyone around you with no tax consequences. That's the annual gift tax exclusion amount. So that's the amount that whether it's grandma and grandpa contributing, whether it's the person with disabilities themselves, whether it's mom and dad, aunts and uncles, your $18,000 is the maximum that can be contributed to the account each year.

Okay. And then what about the cap for a lifetime? The cap for the lifetime, it's interesting. It coincides with the 529 plan limits that states impose, which could be 300 to 500,000 depending on your state. But the unique thing about the ABLE account, different from the 529 plans, is that you don't want to go past a total balance of 100,000. If you go past 100,000 in your balance, then SSI turns off temporarily until you rectify that situation. Spend it on something, go on a trip, whatever. Get it back under 100, then you can keep going with it.

So it might take several years to get to that spot depending on what you need it for. Yeah, very good. Well, we're going to take a break. When we come back, we're going to continue this conversation. We'll talk about who's eligible for an ABLE account. What are those qualified expenses you can use it on and are there qualifications and what about the states and how do they interact with the ABLE programs? Matt Severson with us today, a certified kingdom advisor.

We're talking about ABLE accounts for those with disabilities. Following this interview, your questions today at 800-525-7000. Call right now, 800-525-7000. I'm Rob West and this is Faith and Finance, biblical wisdom for your financial decisions.

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With me today, Matt Severson. Matt is a certified financial planner and a certified kingdom advisor in Overland Park, Kansas. Matt's sharing with us today about the ABLE account.

That's the A-B-L-E, which stands for Achieving a Better Life Experience. And Matt, before the break, you were sharing who this is for. Let's recap that, who are we talking about specifically when we talk about the use of these ABLE accounts?

Great question, Rob. So ABLE accounts are designed for people receiving supplemental security income, either currently receiving or will be receiving once they become an adult at 18. So it's for those that qualify with a permanent disability prior to age 26.

Could be an intellectual disability, could be a physical disability, but it's someone that hasn't been working necessarily, but wants to, but is on supplemental security income with that $2,000 asset limit for their lives. Okay. Now I know there's been a recent change in the law that actually will eventually push that 26-year-old onset age higher, correct?

That's correct. Ironically, on 1-1 of 2026, the age of onset goes to 46. Okay. So that's where as long as the age of onset has happened by age 46, you can use it. So this isn't just for children with disabilities. It's for all ages with disabilities, you just have to meet that onset requirement that's verifiable by the doctor.

Okay. And then another common situation would be a parent who may be listening to this program who's adopted and the adopted child has a severe disability that will prohibit them or impact their ability to earn a living down the road, right? Yeah, exactly.

That's exactly right. So it's awesome to adopt a child with special needs. We've done that in my family and I also have a daughter who was born unexpectedly with Down syndrome. So Down syndrome is going to be with her the rest of her life.

There's not a pill you can take to make Down syndrome go away. It's a wonderful blessing and it's fantastic, but the ABLE account will be perfect for her to be able to use to have resources and be able to work out in the community. Yes. And that doesn't impact her SSI at around $900 a month.

Very good. Now, give us an idea of what counts as a qualified disability expense because before the break, you said basically they can use it for anything. Explain that.

Yeah. So here's the formal definition. A qualified disability expense means any expense related to the designated beneficiary, the person we're taking care of, as a result of living a life with disabilities.

So any expense needed as a result of living a life with disabilities. That's pretty broad, Rob. Yes, it sure is.

Very good. So anything they can think of, I mean, whether that's food, clothing, housing, transportation, even education and travel, right? Yeah, exactly. And one unique thing about ABLE, and remember that most people haven't even heard of this, but it's been around 10 years now. In 2024, we're celebrating the 10-year anniversary of the ABLE account creation. It's companion, typically a companion account for the long-standing tradition of having a special needs trust for a person with disabilities. And one unique little thing with SSI is if SSI finds out that you're using a special needs trust to provide food and housing, that's counted as income that offsets SSI. On the flip side, ABLE accounts, it's income that's excluded in SSI's eyes. So you can use the ABLE accounts for housing and food where you need to be more careful with that, with a special needs trust funding those particular needs. So lots of little nuances here, and that's why I just want to say it's not ABLE or nothing, or it's not ABLE, don't worry about the special needs trust. No, it's a companion.

It's probably a both and for families. Yes. Keep in mind, it's a companion strategy for families serving kids with disabilities.

Yeah, that's really helpful. Because the reality is if we think about their life beyond you as their caretaker and provider, we may need a lot more than $100,000 to provide for them, right? Yes. So the special needs trust is important because that might provide a greater amount of resources to support everything they need long-term. But the $100,000 limit is like a relief valve where they can work to their level of ability, be included, be in the community, and not worry about this constraint of the $2,000 per year. Yes.

Very good. Matt, you mentioned that the ABLE was built on the 529 chassis, we could call it, that we think about in terms of college savings. Those are operated by states, each state having their own. Is it the same with the ABLE account, and where do you go to open these?

Yes, sir. It is the same, these are state-sponsored plans based on the federal government creating the program. So there's only four states that don't have their own ABLE account at this point. So one of the best places I can send you that is objective and provides all the information you need and then you can get state-specific is the website called the ABLE National Resource Center, ablenrc.org is the website. So that will allow you to say, hey, I'm from Kansas or Iowa or Pennsylvania, how do I set up my ABLE account for my person with special needs?

Yes, very good. And if their state doesn't have one, they will direct them to somewhere else. Yeah, you can just use a neighboring state. It's okay to use somebody else's program like I operate my practice in Kansas. Kansas allows you to use any state's 529 plan, which would also apply to ABLE accounts. However, there's some special features within the Kansas ABLE program that other states don't have. So there's some nuances to be aware of based on your state of residency and what's possible. The ultimate rule is that you can only have one of these accounts open per beneficiary at a time.

Yeah, very good. Matt, what about investments inside an ABLE account? I know 529 College Savings allows that. Do we see that feature?

Yes. So very similar to how 529 plan college education accounts are built, where they're going to have preset portfolios based on the state, who the state partnered with to create the investment arrangements. So you're going to have anything from an aggressive allocation to a middle of the road, balanced allocation to a conservative allocation. But what might be even more important for people with special needs is they just need a straightforward checking account that has FDIC insurance with a debit card. So tucked inside of this ABLE account, you can have a portion of that be your, let's call your checking account with FDIC insured cash, and they'll give you a debit card. And then the rest of the account can be invested in another type of allocation that you choose that fits what you're trying to use the money for. Yeah, very good. Matt, do some states offer a state income tax deduction for contributions?

Yes sir, yeah. So similar to how whatever deduction you get for college education 529 plans, you're going to get that same deduction for the ABLE account. Now, the state has to approve that, but just assume, I should say, double check with your state to confirm that the ABLE deduction coincides with the 529 plan college education deduction. It should be very similar, but that ABLE National Resource Center website should spell that out.

Or your state treasurer's website should also have a link to your particular plan. Very good. Well, Matt, this has been really helpful. We've covered a lot of ground here today, and I'm confident that some folks have found out about this ABLE account for the first time, and it will be a real blessing to the disabled or special needs person in their life. Thanks for stopping by, my friend. Yep, you're very welcome, Rob. I hope that someone listening today will be able to help their loved ones with disability achieve a better life experience.

I'm confident they will. I appreciate being here. Absolutely. Folks, that website again, to learn more and find out the best state for you, is ABLEnrc.org. That's ABLEnrc.org. All right, we're back with your questions on any financial topic after this, 800-525-7000. That's 800-525-7000. I'm Rob West, and this is Faith in Finance, helping you apply God's wisdom to the practical decisions you're making today.

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Welcome back to Faith in Finance. I'm Rob West. We're taking your calls and questions today. We'd love to hear from you, 800-525-7000 is the number to call. Again, that's 800-525-7000. Let's dive in today. We'll begin in Indiana. Hi, Keri.

How can I help? Hi. Thank you for taking my call. I have a 401k from a previous employer I quit quite a while ago in 2015, and it's just been sitting there. It doesn't have any fees, but I also can't contribute to it. And I also have a portable pension from that same employer. I am currently working for the government, so I couldn't roll it over. And I was just kind of wondering if I can still roll it over to an existing IRA Roth that I have? Or would I have to, I mean, can I consolidate them all into a new IRA?

Or what's the best thing to do? Yes. Absolutely. So the 401k that you have is the traditional version.

It was the money went in pre-tax. Is that right? Yes. Okay. Yeah.

Very good. And then you have beyond that an existing traditional IRA and a Roth IRA. Is that correct? Just the IRA Roth. Okay. The Roth IRA. Okay.

Yeah. So as long as, so you've got to keep them in the same tax treatment. So the 401k, and then you said beyond that, you also have another type of account.

What was it? A portable pension. And then I also have a whole life policy too that I was thinking of cashing out since I have term life insurance, I have two different policies. I didn't know if I could just consolidate them all or if that's a good idea. Yeah. Potentially. I mean, definitely with the defer, with the portable pension that went in pre-tax and the 401k, those could be combined into one new IRA.

You'd have to open it cause it can't go into the Roth, but you could open a new traditional IRA and then you'd roll over those assets in. What would be the total of the two if you were to combine them? It's probably about 60,000. Okay. Yeah. And then what do you have in the Roth IRA currently?

It's about 10,000. Okay. All right.

Yeah. So you're probably right there on the edge of having enough in the way of investable assets to hire an advisor. So the only question, you know, when you move out of the 401k and the pension is what am I going to do with the money? And in one respect it's good going into the IRA cause you have unlimited options, but part of the challenge is you have unlimited options. So you know, you've either got to make those decisions yourself as to what investments am I buying and what's the right mix of stocks and bonds and what types of stocks and how much is, you know, what is too aggressive and what's not aggressive enough. So you know, I think that's perhaps the next consideration is, are you going to make those decisions yourself or do you have somebody that you could turn to, a financial advisor that you have an existing relationship with or somebody that you would hire? But I like the idea of you rolling it into the IRA.

It simplifies it, you know, those two, the pension and the 401k would now be in one and then you know, you would you know, have the flexibility of being able to you know, pick the investments at that point. Do you have a relationship with an advisor? Yes, I do. Okay. Yeah.

So that would be the way you would go there. Hopefully that helps you Carrie. We appreciate your call. Let's go to Florida. Hi Bob.

How can I help? Hey Rob, thank you for taking my call. Got a question. My daughter is looking to buy a house or land to build a house and she wants to pay cash and then somebody talked to her about doing a delayed financing, which I'm not quite understanding what that is, where she can get her cash back and get a mortgage, I'm thinking that's what that is.

Right. Yeah, essentially that's what happens there with the delayed financing. Essentially you're buying, you're a cash buyer, so you have to have the ability to buy it without a mortgage, either by liquidating stocks and securities or you have the money in savings, but then you can essentially delay the financing and there's a variety of reasons why from a planning standpoint you might want to do that. But the key with the delayed financing is number one, it has to be done within six months. Number two is a cash out refinance, which is typically what you would get if you go to a lender and you say, I've had this property for a while, I want to get cash out. You might pay three, four, five, six percent for that. The delayed financing doesn't have those additional costs of cash out refinancing, so it allows you essentially to pay less and then lock in that rate, create that liquidity by getting that money back out.

The question is why. If she's just doing it to try to get a little better interest rate in the next six months and she's got the money to do it, sure, she could. But because she can't go longer than six months, you'd need to just understand what's the real benefit to her. And I think that's where an advisor could help her plan through this. But yeah, definitely an option and maybe a great option for her.

I certainly don't have any problem with it. Thanks for your call, Bob. Sue, how can I help?

Hi, Ron. Thanks for the ministry that you all do. We have a family business that we feel we need to be the best stewards possible and are currently with a credit card processing company that does not really share our values, our Christian values. And so we are looking to try to get direction on credit card processing companies to handle credit cards for our family farm business that you might recommend or how to go about and find out where to go with that. Very good. Well, I appreciate you asking. More and more believers, Sue, like you are wanting to align their business dealings with their values, whether that's a credit card processor, a bank or even their investing solutions.

It's difficult, though. And so where do you go to get this information? One resource that may or may not be helpful, it's really primarily for publicly traded companies and mutual funds.

Although the processor that you're looking for may be in there or as you find others by doing just even your own research online, you might be able to run them through this data set. It's at inspireinsight.com, inspireinsight.com. It's a free tool with biblical values data on around 41,000 companies in the United States, again, focused on publicly traded companies. But you may be able to get research back that shows whether the company happens to align or is misaligned with your values, pulling from a whole host of data sets into one aggregated source.

So that's one. You could also reach out to our friends at Christian Credit Councilor, excuse me, Community Christian Credit Union, I'll get it right in a second, at joinchristiancommunity.com. They could likely recommend a processor as a Christian Credit Union. They would be familiar with your idea that you want to align your values not only with a banking partner, but with a processor. They may have a suggestion on where you look. I wish I had just kind of at the ready, the name of a processor that you could feel good about. I don't.

I love the idea of where you're headed, and so I think I would do a bit more research. Okay, and that website again was communitychristian.com? Yeah, well, so just go to joinchristiancommunity.com. That's joinchristiancommunity.com. That's the website that will take you to the Christian Community Credit Union.

That's what I couldn't get out before. And then the other was inspireinsight.com, and that's where you can access this biblical values data set on about 41,000 companies. Great. Okay, thank you very much, Rob. All right, Sue, thanks for your call today. I hope you'll make plans to join us again next time for another edition of Faith and Finance. Faith and Finance is provided by Faith Buy and listeners like you.