Exploring the Benefits and Considerations of ABLE Accounts
ABLE accounts are a remarkable way of achieving this, offering several benefits along with a few important considerations. Let's delve into the details, and remember, it's not too late to make your 2024 contribution!
Benefits of ABLE Accounts
- Tax Advantages: One of the key perks of ABLE accounts is that earnings grow tax-deferred, and withdrawals made for qualified expenses are entirely tax-free. This makes them a financially attractive choice.
- Public Benefits: These accounts are designed to ensure that balances do not interfere with Medicaid eligibility. Furthermore, if kept below $100,000, they aren’t counted towards the SSI (Supplemental Security Income) resource limit, helping maintain eligibility for important public benefits.
- Broad Use: The flexibility of ABLE accounts is notable, as the funds can be applied to a wide array of expenses like education, housing, transportation, and healthcare.
Drawbacks to Consider
- Contribution Limits: It's essential to note that annual contributions are capped at $18,000 per year for 2024, in line with the federal gift tax exclusion. This cap applies per beneficiary, not per contributor.
- Medicaid Payback: In certain situations, if funds remain in the account after the beneficiary's death, they might need to go toward reimbursing Medicaid for services provided. This is an important consideration when managing these accounts.
- Account Fees: Be mindful of potential associated fees. Some ABLE accounts may have setup or maintenance fees, which can accumulate over time.
It's worth celebrating that Ohio residents can enjoy an additional benefit: a $4,000 deduction for contributions. So, if you haven't already, now is an excellent time to explore this beneficial opportunity and consider making a 2024 contribution to an ABLE account, ensuring more financial freedom and security for your loved ones. It is a great way to give the gift of financial security.