Author: Deborah Goodkin, Managing Director, Savings Plans, First National Bank of Omaha
As we close upon the calendar year, now is the perfect opportunity to reflect on one’s savings progress and begin to plan out financial goals for 2021 and beyond.
The Enable Savings Plan remains a steadfast partner on the journey to achieving these financial goals. Not only does Enable help protect access to vital resource-based benefits such as Medicaid and SSI, but the Plan helps Account Owners reach their goals faster and more efficiently through numerous tax advantages. Read on for a checklist of the many ways that Enable helps individuals with disabilities and their families accomplish tax savings.
Why save with Enable, rather than in a standard savings or investment account? One important factor is that Enable Account Owners benefit from compounded, income tax-deferred growth, also known as “growth on growth.” Because Enable account earnings are state and federal income tax-deferred, the full earnings amount remains in your account and grows with no money being subtracted to pay current tax obligations. That means earnings happen more tax efficiently, helping to increase the account value even faster and maximize earnings potential associated with market growth.
Not only do Enable savings grow tax-free, but withdrawals are also free from any tax burden as long as the funds are used for qualified disability expenses (QDE). The ABLE Act defines a QDE as an expense related to the disability of the Eligible Individual. This covers a wide range of categories, including medical expenses, education, service animals, housing, transportation, financial management and administrative services and basic living expenses. Click here to explore the full list of qualifying expenses.
Gift Tax Exclusion
Enable contributions can also offer tax benefits for the friends and family of Account Owners. Gift contributions to ABLE accounts are considered a completed gift from the contributor to the Account Owner, and qualify for the annual gift-tax exclusion - which for 2020 is $15,000 total per person for each beneficiary. That means that friends and family can make significant contributions to their loved one’s financial independence without triggering a gift tax. In addition, gift contributions can be an impactful tool for friends and family to lessen the value of their taxable estate.
529 Plan Rollovers
Many families save for their children’s higher education with a tax-advantaged 529 College Savings Plan. If families have extra 529 savings that they will not need for higher education, a great benefit of the Enable Savings Plan is that these funds can be rolled over into an Enable account without incurring any tax consequences. This can be done from both a 529 account with the same beneficiary as the Enable account, or from a 529 account with a beneficiary in the same family.
As we near the end of another year of savings, on behalf of the entire Enable team I wish you and yours a joyful holiday season, and a motivating new year. Happy saving!