Episode 341: Saving Without Limits: How ABLE Accounts Empower People with Disabilities with Scott de Varona

Most people have never heard of an ABLE account, but it may be one of the most useful and underused tools in disability financial planning. Melissa Joy, CFP®, is joined by Scott de Varona, division director of MiABLE, Michigan's ABLE savings program, to explain how these accounts let people with disabilities save and invest money without jeopardizing benefits like Medicaid, SSI, and SNAP. 

For decades, individuals had to stay under a $2,000 asset limit to keep those benefits. ABLE accounts, modeled after the 529 education savings plan, changed that by giving people with disabilities a legal way to shelter savings, up to $20,000 a year, or $35,650 for those who are employed, while still qualifying for the programs they depend on.

Scott and Melissa cover who qualifies (the eligibility window recently expanded from before age 26 to before age 46), what the money can be used for (housing, transportation, technology, health and wellness, and even funeral expenses, among many other categories), and how the accounts work alongside special needs trusts and other estate planning tools. 

They also discuss an important open question: the Medicaid clawback provision that currently allows states to recoup funds from an ABLE account after the owner's death, and the pending state and federal legislation aimed at eliminating it. With an estimated one million Michiganders eligible and fewer than one percent enrolled, this conversation is a reminder that ABLE accounts likely apply to more listeners, or their family members, than they might expect.

What You'll Learn

• What an ABLE account is and how it protects eligibility for Medicaid, SSI, SNAP, and other disability benefits
• Who qualifies: the recent expansion of the eligibility window from disability onset before age 26 to before age 46
• The three ways to prove eligibility, including SSI/SSDI status, the compassionate allowances list, or a physician certification
• 2026 contribution limits: $20,000 annually, plus up to $15,650 more for employed account owners under ABLE to Work
• The wide range of qualified disability expenses, from housing and transportation to assistive technology and funeral costs
• How authorized individuals can manage an account on behalf of someone who lacks capacity
• The current Medicaid clawback provision and the pending state and federal legislation that could eliminate it
• How ABLE accounts can coordinate with special needs trusts and other estate planning strategies

About Scott de Varona

Scott de Varona is the division director of MiABLE, Michigan's ABLE savings program for people with disabilities, and has led the program since its creation. He has worked for the State of Michigan since 1999 in various roles within the Departments of Treasury and Health and Human Services. Scott holds a Bachelor's degree in Business Administration from Northwood University and an MBA from the DeVos Graduate School of Management. Learn more or start an account at Michigan.gov/MiABLE.

The previous presentation by PEARL PLANNING was intended for general information purposes only.  No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https...

Transcript

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Welcome And What We Cover

SPEAKER_00 0:00

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and the founder of Pearl Planning. My goal is to help you streamline and organize your finances, navigate big money decisions with confidence, and be strategic in order to grow your wealth. As a woman, you work hard for your money, and I'm here to help you make the most of it. Now let's get into the show.

What An ABLE Account Solves

SPEAKER_00 0:47

But we are fortunate to have an expert on ABLE accounts joining us today. We are joined by Scott DeVarona. He is division director of Michigan's My Able program. That is the ABLE account for the state of Michigan. And he has been the program director since its creation in 2015. So since it was first created, we're coming up on the 10-year anniversary of the ABLE accounts. And we're going to learn a lot. Just explore something that's going to be new to many, but applies to more of you than you would think. So, Scott, welcome to the podcast.

SPEAKER_03 1:24

Thank you very much for having me, Melissa. I appreciate being here.

SPEAKER_00 1:26

Well, I'm so glad you joined us. We are planning to do an informative presentation for financial planners talking about how planning strategies for people with special needs, which introduced me to you. And I was like, oh, our podcast listeners need to hear this because even I needed some reminders about all of the opportunities that the ABLE program provides. So tell us a little bit about what type of account we're talking about.

SPEAKER_03 1:51

Sure, absolutely. Again, thank you very much for the opportunity. ABLE accounts have had a long history. They are modeled after the very successful, very popular, very well-funded 529 education program.

SPEAKER_00 2:06

Everybody's familiar with and well understood, right?

SPEAKER_03 2:09

Yes, everybody knows 529. You have a kid, you understand 529, start saving for college now because it's going to be really, really expensive 20 years from now. Well, they modeled this program after that because unfortunately, for far too long, individuals with disabilities, in order to qualify for the benefits that they need, have been told to stay broke. The Americans with Disabilities Act was passed over 30 years ago, and it was created to ensure that everyone, regardless of ability, had access to the places that they needed to go, whether that's a hospital or a school or museum or wherever. And we've done a really good job as a society with allowing for accessibility. But what the ADA didn't do was give people who have a disability a chance to save money, a chance to invest money. Because a lot of their disability benefit programs have what's called an asset limit. And most in most instances, that asset limit is $2,000, which basically means you lose your benefits if you have more than $2,000. Well, I don't know about you, I don't know about your listeners, but I know I could not live on just $2,000 in assets.

SPEAKER_01 3:22

Right.

SPEAKER_03 3:23

So instead of making the change to all of those benefit programs, they said, why don't we give people an account that they could put money into, do what they need to do with their money, but have it, for lack of a better term, not count against their eligibility for the programs that they need. And that was the genesis of the ABLE program. A uh a gentleman about 20 years ago went into his financial planner's office and said, I need to start saving for my kids' education. Financial planner said, Yeah, we've got 529s, we've got UGMAs, we've got all of these different programs for people to save money. And the dad said, But my daughter has Down syndrome, may not go to college, but she's going to have expenses that she's she's gonna have. How can I save? And the financial planner said, I don't have a product for you. And that dad went all the way to Congress and said, Give me a way to save for my kid. And that was the genesis of the ABLE program. ABELE is a national program, but like our 529 program, each individual state has its own flavor, let's say. So my ABLE is Michigan's program. I encourage everyone who's listening, check out your home state's program because each state has a little bit of a difference. Um, for instance, tax deductibility, um, the aggregate amounts can be different and vary by state. Um, so I encourage everyone to check their state program. Uh, Michigan has a wonderful program for Michigan residents, but it is not limited to Michigan residents. You don't have to be a Michigan resident to participate in the Michigan program. So we have clients in 43 other states as well. So it's a great opportunity for families to start saving for what could be really, really expensive stuff because of that disability.

SPEAKER_00 5:10

That's a great, you know, kind of start. I think people don't understand about these accounts for a variety of reasons, including, you know, therefore, a smaller cohort of people, although actually we're going to talk about that a little bit. It's much broader than you may think with that intro. Um, also, it's newer. And um, you know, 529s have been championed because many people want to save for college. College, you know, the needs of college students and the expenses of college are are very um well understood often in the news. But also, I find um, you know, college savings plans were both sponsored by programs that pay advisors as well as programs that do not pay advisors. And so there was a sales force working to get out the word, whereas um perhaps you're more of a public relations force, not a um sales for I'll get paid more.

SPEAKER_03 6:02

You hit the nail on the head. Yes, you're absolutely right. Yeah. Um let's face it, my biggest problem is awareness. There are just not enough people who are who are aware of this program, which is why when you invited me out of the podcast, I'm like, absolutely, because I have to get the word out. Um, I was saving this to the end, but I'm gonna go ahead and say it now. Um, we figure there are about a million people in the state of Michigan alone who are eligible for this program. A million people. And we have opened up 7,500 accounts. So we have a long way to go. We have a lot of work to do to build awareness, to build education, and to hope that to get this population to adopt this product. Um, again, for far too long, for generations, this population has been told don't save. If you do save, we are going to punish you by taking away your benefits. And we've had to combat that generational knowledge mindset from the very beginning. Like, I can't save, I can't work. If I have too many hours, I'm gonna lose my benefits if I do all that, and I have to constantly combat that with you will not lose your benefits because of your ABLE account. And so that has been a real um uphill battle for us to try and to get people to understand that you can save, you can invest, and most importantly, you can spend the money on the things that you need without jeopardizing eligibility for those programs.

SPEAKER_00 7:27

So uh and when you say losing benefits, are we talking like disability programs andor Medicaid programs?

SPEAKER_03 7:33

Great question. Yes. The entire intent of this program is to allow people to keep their most important benefits like Medicaid, like SSI, like SNAP, like Section 8 HUD, like any of those benefit programs that they have because of that disability. We do not want people to be in jeopardy of losing those for having too much money. And for far too long, this population has been sold. Stay broke. If you don't stay broke, you're going, you're going to lose those benefits. Now we have a place that is, for lack of a better term, it's a legal asset shelter. It is a place to put money that will not count against them when it comes to their eligibility for those disability benefits.

SPEAKER_00 8:18

Perfect. So

Who Qualifies And The Age Rule

SPEAKER_00 8:19

let's talk about that eligibility. How what defines your um opportunity? Who would be eligible to contribute to enable?

SPEAKER_03 8:28

So I'm going to tell you two stories. Okay. The first story is when this first when this first became available to people, and that gentleman went to Congress and said, we need to give away for people with disabilities to save money. And Congress did what Congress does and says, okay, we'll give you this, we'll we'll create this account, we'll create the legislation, but we don't know how many people are going to use it, therefore, we don't know how much it's going to cost us. So we're going to limit it and we're going to say you must be disabled before age 26. Completely arbitrary number. If you're disabled before age 26, you can participate in this program. And we said, okay, fine, we'll run with that. And for 10 years, we ran with that. And then during that 10 years, we would come across people all over the country who would say, I didn't become disabled until I was in my late 20s. I was in a car accident in my 30s, and now I'm in a wheelchair, or I had a traumatic brain injury, and I need a disability savings program. And for 10 years, I had to tell these people, I'm sorry you can't participate because you weren't disabled before age 26. Well, the good news is Congress, a decade later, realized that maybe we should expand this. So in January of this year, so just nine months ago, they expanded eligibility to allow individuals who become disabled before age 46 to participate in this program. Now the question I always get is why didn't they just take the age range away? I don't have an answer for that question. It makes a lot of sense to me because right now, if somebody gets in an accident and has a traumatic brain injury at age 47, I can't help them today. So it's one of those things where I think iteratively we will eventually get to a point where there won't be an age range, but currently there is. The good news is it doesn't matter how old you are when you open the account. It matters how old you were when you became disabled. So I have clients that are in their 80s, I have clients that are in their 60s and 70s who've been disabled since they were born, but they are participating in this program. So again, it doesn't matter how old you are when you open the account, matters how old you were when you became disabled. And as long as you were 46 or less when you became disabled, you can participate in this program.

SPEAKER_00 10:46

So let's talk about the definition of disability.

How Disability Eligibility Gets Proven

SPEAKER_00 10:48

Is there a list of conditions that require that you require to fit into one checkbox or that's a great question?

SPEAKER_03 10:56

And they intentionally made this product eligibility as broad as possible.

SPEAKER_01 11:03

Okay.

SPEAKER_03 11:04

So instead of having a list of conditions or a qualification checklist, there are three ways that you could prove eligibility for the ABLE program. Number one, if you are eligible for SSI or SSDI because of a disability, you're eligible. You don't need to be receiving those benefits. I talked to a number of families who say, I have, I don't need to worry about SSI, I have an adequate income, we don't have to worry about getting those federal benefits, even though they might still be entitled to them. So it's if you are eligible for those benefits, you are eligible. Second condition is if you have a diagnosis that is on the Social Security Administration compassionate allowances list. Huge amount of words there. But basically, what it is is it's a list of conditions that the Social Security Administration says that's disabling. We don't need anything from you. We know that that's a condition that's on there. There are lots of different syndromes and diagnoses that are on that compassionate allowances list. And if neither of those first two conditions apply, it's as simple as getting a physician certification. You can get a doctor's note, essentially, that says this person has a disability, it's going to last longer than a year, and they're entitled to an ABLE account because of that disability. So as long as a physician will sign off on that, you're eligible for this program. Um, the point is we didn't want to have another, quite frankly, administrative burden for people to go through. So we said make it as easy as possible for people to apply. So basically, if you're already receiving disability benefits, you're eligible. That's essentially how you can tell.

SPEAKER_00 12:43

And the scope is much broader because of that number three, right? So there are so many diagnoses that qualify as a disability. Correct. You can think of how many kids have IEPs and accommodations in school. You are kind of the for this state, right? The um person responsible for monitoring that, but there's not like a police state or tell me how that works. Like, I don't want to put you.

SPEAKER_03 13:10

No, no, no, no. I completely understand. And um number one, again, this program has only been around for 10 years. Our 10th anniversary is on November 1st of 2026. So we're really excited for that. But there has never been in Michigan or nationwide any audits or anyone questioning is this person really disabled? Were they really disabled before age 46? Um, or anything like that. Neither the Social Security Administration nor the IRS nor the Michigan Department of Treasury have ever done anything like that. I stress yet. Right. It may happen at some point. You know, somebody may be tasked with, we're gonna need to see some documentation that shows that this person has had this disability since, but it hasn't happened yet. Um, the the families that I talk to and and the clients that I have, it's not going to be very difficult for them to say, look, this person has had an IEP since they were in grammar school.

SPEAKER_01 14:07

Right.

SPEAKER_03 14:08

So it's not gonna be hard for them to diagnose to to provide evidence of a diagnosis prior to age 46. Um, like I said, it hasn't happened yet. I suspect that at some point in the future it may happen as adoption continues to grow, just like our 529 program has grown and therefore audits have happened. I think that's what'll end up happening here, but I don't see it as a major issue, at least in the near future, because yeah, there's only 7500 accounts.

SPEAKER_00 14:37

Right, exactly. We're not encouraging abuse. This program is not when we look at the numbers at least being abused um in excess. And but I just encourage our listeners to realize as we talk about what this program means, that um you almost assuredly know somebody who would likely be eligible for this type of program that this program was built for. So it is is much broader. And we're gonna get into the what the benefits are in a moment. But um, so just be open-minded. Because when we first had our discussions, Scott, I was like, oh my gosh, I I realized that my colleague has a brother who is high functioning autistic. He lives with mom and dad, but he has a job, he makes money. Um, but this account would be a great fit for him as they're planning because she will eventually be responsible for his care. And this is a great way for the family to plan for some of the money because he really is pretty low maintenance when it comes to what he uses his money for. Mom and dad, you know, make dinner and he has um, you know, a short list of things that he wants in his life. And so the money tends to pile up.

SPEAKER_03 15:46

Yep. Yeah. And and quite frankly, that's exactly why this program was created. I talked to way too many families, especially initially with this project, that for lack of a better term, um put money in places it probably shouldn't be, like a coffee cup or under the mattress or in somebody else's name, or the one that absolutely drives me insane, spend it frivolously so they can maintain eligibility.

SPEAKER_00 16:15

Right. We have been or in very expensive insurance products, which is necessarily need.

SPEAKER_03 16:24

Yes.

SPEAKER_00 16:24

Products for special needs planning, but you know, just to like unload money um into the wrong hands is not the goal.

SPEAKER_03 16:33

Yeah.

SPEAKER_00 16:34

Um let's talk about. We've already hit on that um this program is not considered when um eligibility is considered for government benefits. How much

Contribution Limits And Account Ownership

SPEAKER_00 16:46

can you put into an ABLE account?

SPEAKER_03 16:48

So yeah, the IRS and the excuse me, the IRS determines every year how much is qualified to go into an ABLE account for 2026. That amount is $20,000. So you can shelter $20,000 in your ABLE account currently.

SPEAKER_00 17:02

But per year.

SPEAKER_03 17:03

Per year, which means and it and it is indexed to inflation, which means next year it'll probably go up. It has gone up.

SPEAKER_00 17:09

So it's like a contribution limit, like there's a contribution. Okay.

SPEAKER_03 17:13

Yep, very similar to that. The good news is that there are a number of individuals who have a disability and are employed and therefore have significant assets that they need to shelter. For those people who are employed, they are allowed to contribute an additional $15,650 into their ABLE account. So theoretically, a person with a disability who has an ABLE account could shelter $35,650 in their ABLE account this year. So I like to do this as a comparison. Um, and I'm sure you know, Melissa, as a financial planner, what the Roth IRA limit is. Right. So then $7,500.

SPEAKER_01 17:55

Yeah.

SPEAKER_03 17:55

I'm five times that $35,000 can be sheltered in an ABLE account. So I talked to a lot of people who are like, well, wait a minute, I can shelter. So it it can be a significant amount of money for people to shelter.

SPEAKER_00 18:08

Now I'm glad you mentioned Roth because it it kind of functions like a Roth, which is very similar to a 529. So that money is growing tax-free, correct?

SPEAKER_03 18:18

Right. It goes in when you take it out. And it goes out untaxed, correct.

SPEAKER_00 18:23

Okay.

SPEAKER_03 18:23

So yes, it is a so you can't uh do a pre-tax contribution to an ABLE account. It must be post-tax contributions, but we do accept payroll contributions as long as they're post-tax. We we can we can take money directly from a payroll as long as your payroll office allows it. So there are a lot of individuals with disabilities that have that that are employed and they want to send money directly from their paycheck into an ABLE account on a regular basis, we can do that as well. So it makes it really easy and really flexible for individuals with disabilities who are employed because they can shelter $35,000 a year.

SPEAKER_00 18:55

So if you're employed, the program is set up to mirror um or to consider that employment income. That 20K number is very close to 19,000, which is the gift limit for um a single person to give to another person. And I'm assuming is this um a contribution to this account that is not from the person who is the beneficiary of the account, is that considered a gift?

SPEAKER_03 19:21

It is 100%. The other um, you know, and there are some rules with Able accounts that are a little different than 529. Right. For instance, with 529 accounts, you can have as many as you want. You know, mom could set one up in California, mom could set one up in Virginia, dad could set one up in Ohio.

SPEAKER_00 19:36

Parents get divorced, then they can't get it.

SPEAKER_03 19:38

Parents get divorced, they can each have their own. Yes. Able accounts are a little different in that you are limited to one. So if you open an account in Michigan, you can't open an account in another state. Um, if there's that divorce mom and dad situation, the account owner can only have one account. The other interesting thing with an ABLE account is regardless of who funds the account, I don't care if grandma and grandpa, aunts and uncles, teachers, family, friends, doesn't matter who puts the money in the account, the money belongs to the person with the disability. The money belongs to the account owner. It is a completed gift, which means Melissa donates $500 to my daughter's account. That that account is my daughter's. That $500, she can do with what she wants in her account. So it is a little bit different than the $529 education account, but you know, essentially that's what it is. It is a $529A able account.

SPEAKER_00 20:28

Now, when we um talk about there is an account owner who is the um the account owner is the person who the funds need to go to.

SPEAKER_03 20:39

Correct. It's the person with a disability.

SPEAKER_00 20:41

Some people with disabilities are able to manage their own accounts and um other people are not. I mean, some of all of us are able to manage their our own accounts. No doubt. So is what is the name of who is the responsible party for the account or the fiduciary?

SPEAKER_03 20:59

So, yeah, like you said, um, we enroll minors. We enroll minors all the time. Parents want to save even if their child has a condition that may prevent them from going to college, they still want to save for their future expenses. Um, we also have individuals with disabilities who lack capacity. You know, they have someone who helps them with their finances. And for that reason, ABLE programs have what's called an authorized representative or an authorized individual who handles the account on behalf of that person with a disability. An authorized individual can be the same people who are already helping that individual with a disability. Authorized individuals can be a parent, a sibling, a spouse, a grandparent, a power of attorney, a guardian, a conservator, a representative payee. Basically, like I said, anyone who already helps a person with a disability can help them with their ABLE account as well. And conversely, we also allow individuals with disabilities who have capacity to handle their own finances. They get to decide how much to save, how much to spend. How much to invest, how to invest that money. Those decisions are all theirs and up to them. They get to decide where that money goes and what they use that money for.

SPEAKER_00 22:09

Is there a qualification process or is the authorized individual identified by who opens the account? And then if there's like a the capacity issue becomes an issue later than you present paperwork or something.

SPEAKER_03 22:22

So for instance, when you enroll, one of the first questions that we ask is Are you opening this account for yourself or for someone else? Got it. Then depend depending on that, if it's for someone else, is it a minor? Is it an adult? And then based on that, if it's an adult, is it an adult with capacity? So those are the kinds of questions when you go through our enrollment at Michigan.gov slash my able. That's where you can you can see those different flavors and make those determinations. Okay, I'm enrolling my child, I'm enrolling my child who happens to be an adult, I'm enrolling my adult child who lacks capacity. All of those kinds of different paths, let's say, are available on our website. So as you're going through those enrollment, the other great thing is our enrollment link is dynamic. So if you're enrolling a child, it's only going to ask you questions down that path. If you're enrolling an adult, or if you're enrolling yourself, it's only going down those paths. Great. So it makes it really easy to get to the next step that you need to go to.

SPEAKER_00 23:19

Perfect.

What You Can Spend It On

SPEAKER_00 23:20

So then the monies in there, you've decided you need this account. What do you do with that money? Let's talk about that. And then we'll talk about what we do with the money that you don't need immediately.

SPEAKER_03 23:30

So again, like a 529 education account, which is a little different. You save money, you use it, or you save money for 20 years, you use it for five, or for some of us, six or seven, and then you know you're done. Well, an ABLE account is a little bit more of a lifelong product because you can open it when a child is born, literally, you could use it throughout their life. So, unlike a 529 education account that can only be used for education expenses, tuition, books, fees, computers, room and board, those kinds of expenses, you can use your ABLE account for that plus pretty much everything else. Um, let's face it, having a disability can be very, very expensive. And for that reason, ABLE accounts are very flexible in what you can use them for. When uh they were testifying and creating this program in Congress, one of the questions that Congress asked was, Do you want this to pay for anything? And the answer was yes. Because trying to come up with a need for, okay, what does a child with Down syndrome need? Huge list. What does a person who's born deaf need? Another huge list. What does a person who's in a traumatic uh car accident and has a uh uh uh a limb severed, what are they gonna need? There's no way for them to come up with a list for what a quote unquote disabled person needs. So they gave us a list of categories and they said, okay, these are the categories of things that we're talking about that we want you to use your able account to pay for. Education. So you can use it just like a 529 education account. Tuition, books, fees, computers, all of that stuff, but so much more. You can use this account to pay for housing, rent, mortgage, utilities. You can use this account to pay for things like homeowners insurance or property taxes, um, anything related to the costs of owning a home, furniture, making modifications to a home to allow for accessibility, all are allowable expenses out of an Able account. You can use this account for basic living expenses. Need to pay for groceries, you can use this Able account to pay for that. One of the number one things that people use my Able account for is food. Go into the restaurant, go into the grocery store, because that is the one thing that people need every single day. Gotta have food.

SPEAKER_00 25:44

And is it like a reimbursement system, or do you have a way to like type a card?

SPEAKER_03 25:48

You're burying my lead.

SPEAKER_00 25:49

But sorry.

SPEAKER_03 25:50

That's okay. That's okay. Um, but you have to visual aid also. Yeah.

SPEAKER_00 25:55

Just holding up a debit card for those of you that are only listening on audio.

SPEAKER_03 26:00

Yes, we do have a debit card that makes it really easy to get money out of your ABLE account. Um, I just want to run through the list of qualified disability expenses first. No problem. Um, we talked about education, we talked about housing, we talked about basic living expenses. One of the number one reasons why individuals with disabilities are unemployed or underemployed is a lack of transportation. People with mobility issues have a hard time getting from place to place, and for that reason, transportation is allowable expense out of an ABLE account. And a lot of people think, okay, I could buy a van or I could buy a wheelchair accessible vehicle, and that is true, but you could also buy a bus pass. You could also pay for an Uber, you could pay for a taxi, you could pay for a flight, you could pay for a ferry to go to Mackinac Island, any transportation expenses of allowable expense out of an ABLE account because we realize that it's really expensive to have transportation expenses. You can also use your Able account to pay for assistive technology, iPads, e-readers, screen readers, any of those types of technological advice or technological device. I also like to talk about service animals because many individuals with disabilities utilize service animals. So you can pay for the veterinary costs, the food, the training, the animal itself can all be paid for out of an ABLE account. A lot of people thought when this program first came out that it was going to be like a health savings account. Because, like I said, individuals with disabilities have exorbitant in some cases medical costs. So you can pay for any health or wellness costs out of your ABLE account. And a lot of people think, yeah, doctor's visits and testing, yes, but also pharmacy costs, durable medical equipment, any form of um testing or medical, even gym membership or health insurance premiums can be paid for out of an ABLE account.

SPEAKER_00 27:48

Interesting.

SPEAKER_03 27:49

And if you need the services of a financial professional or a CPA or an attorney, you can pay for their services out of the ABLE account. And nobody likes to talk about it, but I always have to mention it. Every single one of us is going to have to fund a funeral at some point. And you can pay for funeral costs out of an ABLE account as well. They do not need to be prepaid. Um, so it's an opportunity for people to say, hey, I've got some money left over in this account. Let's have a celebration of life. Let's let's pay for you know whatever we need to do at the end of this person's life. The other

Medicaid Clawback And Planning Ahead

SPEAKER_03 28:21

thing that I do encourage people to do when they're opening an ABLE account, it is a great opportunity to talk about what happens when.

SPEAKER_00 28:28

Yes, thank you.

SPEAKER_03 28:29

You're getting what happens when what happens when the person with an the individual with a disability passes away? What happens when the caregiver for the person with a disability passes passes away? What do you want to have happen? Um nobody likes to have those conversations, but nobody really likes to have those conversations after somebody's already and everybody's grieving already. Um, it's it's already a highly intense emotional journey. Why do we have this conversation now while we're setting up this account, while we're establishing what do we want to have happen when? Because as we all know, it's not an if, it's a when. So let's plan for it. Um, so I encourage all of my families to start opening accounts. This is a great opportunity. We're talking about the future. We're talking about, you know, what do we want to see the future for this person with a disability? Do we want them to stay in our home? Do we want them to have long-term care? What do we want to have happen? And then what happens when? It's a great time to have those conversations and those um, in some cases, very emotional. I don't even want to think about this now, but we need to.

SPEAKER_00 29:38

Right. So there would be a um instructions in terms of something similar to a is it called a beneficiary designation for like who the money goes to after someone passes away?

SPEAKER_03 29:50

So able accounts are a little different because we can't just call someone a beneficiary like you can with any other financial account. Because again, in order to qualify for an Able account, you have to have a disability before age 46. Right. So for someone were to say, I want my daughter's ABLE account to go to Joe Smith, doesn't matter.

SPEAKER_00 30:09

Well, Joe Smith does their sibling after they pass after the account.

SPEAKER_03 30:12

Exactly. But if that person doesn't have a disability, then they're not qualified for an ABLE account. So what happens currently is after an account owner passes away, we get the documentation that says this person has passed away. And that in most instances the check is issued to the estate of that person who passes away. Okay, or it just goes to the next of kin. Now, I do want to mention that currently state law allows Medicaid to claim whatever's left in an ABLE account when the account owner passes away.

SPEAKER_00 30:46

Like a clawback if they had been receiving Medicaid benefits.

SPEAKER_03 30:49

Exactly correct. However, Michigan Medicaid currently today does not do that. I can't guarantee they won't do that in the future. I can guarantee they don't do that today.

SPEAKER_00 31:00

So it's a possibility, but it's not current practice.

SPEAKER_03 31:03

Correct. But there is state legislation on the books right now, waiting to get out of committee that would prevent Medicaid clawback to Able accounts. Those of you who are interested and want to help me lobby for this, it's Michigan House Bill 5922 and Michigan House Bill 5923 that would prevent Medicaid from claiming ABLE accounts when the account owner passes away. I don't know how many of you are following Congress, both in federal and state. Nothing's moving because it's election time. So hopefully sometime after maybe next term, maybe next session, it'll get reintroduced. But in addition to state law, it's also being debated in federal Congress. Senate Bill, excuse me, 4498 in the U.S. Congress as part of the Able Tomorrow Act is also seeking to eliminate Medicaid clawback. Even Congress understands that that is the number one reason why people are hesitant and reluctant to open these accounts is I do not want to think about putting money into an account for my child, for someone who I'm related to, who has a disability, and then having Medicaid claim that money when they pass away. I don't like that provision. I don't think anybody really does, but it's the law as it stands right now until they change it.

SPEAKER_00 32:23

So well, I'll tell you though, like there's probably some hope because whereas there's gridlock in um all legislatures nowadays, state and federal, um, changes that are more um less restrictive, I should say, and more beneficial to account owners have been pretty consistent. I mean, you use the example of a higher contribution limit being available. Um, 5.9s used to be much more restrictive than they are today. So um it would be worth a call.

SPEAKER_03 32:54

Melissa, you are absolutely right. And one thing I like to tell people when talking about ABLE is the one thing that that Congress, both at the state and federal level, have done in the past decade with this program, everything that they have done is to make it easier, make it bigger, make more people eligible. So I don't foresee that going anywhere other than up.

SPEAKER_00 33:19

Yeah, it's easier to agree on. It's um it's a nonpartisan issue, frankly. And like having assets set aside, even though there are would still be state obligations or federal obligations, it's much more functional to not have destitute population um for already vulnerable citizens.

SPEAKER_03 33:40

There is absolutely no doubt that everyone across the board, Republican, Democrat, young, old, men, women, everybody thinks that people should be empowered financially and economically self-sufficient. Well, if they're worried about this provision, and this provision is preventing them from trying to become either additionally financially literate, economically self-sufficient, then let's get rid of it. And let's let them do what we intend them to do, which is to become economically self-sufficient. So let's get rid of that provision, and more people will be apt to open an account and use this account. So I agree with you. Um, hopefully, our elected officials will agree with us as well and uh and and get rid of that provision because it it is. It's one of the reasons why people say that I I get it, I understand what you're doing, but I but I don't want this risk. I do not want this risk. You're absolutely right.

SPEAKER_00 34:32

So when the check gets written to the estate, um, does it necessitate uh probate or is there a way to avoid probate based on trust?

SPEAKER_03 34:41

I'm not a probate attorney by any stretch of the imagination, so I'm not gonna even try to answer that question. Um, but I have never heard, nobody has ever come to me and said, well, we had to go through probate, and it may be regarding the dollar amount.

SPEAKER_00 34:54

So talk to your estate planner.

SPEAKER_03 34:56

Exactly correct, without a doubt. Yes, talk to somebody who could provide that advice um because that's and is it a taxable event? No, because it goes to the estate or not not my area of expertise. Talk to your tax professional to determine that as well.

SPEAKER_00 35:09

Got it. Now,

Investing Options Plus Real Success Stories

SPEAKER_00 35:11

when you have are making contributions, if you don't immediately need the funds, um then the accounts can be invested similarly to your 401k or your 529, and you have a menu of investments. Yep. Michigan, it's ABLE is in a consortium with other states. Is that correct?

SPEAKER_03 35:29

That is correct. Michigan joined the National Able Alliance about five years ago. It's about 17 other states um throughout the country, so literally from Delaware to Alaska, okay, um, where we have combined basically resources so that we don't have to do, for instance, individual marketing. So we can we can share marketing. We share a um like an enrollment platform, so we all don't have to do that, which has made it really good because instead of you know just Michigan making the decisions, it's it's all of us. It's all of us coming together and go, how can we better serve our population? Again, this is a really small, really small program, even in Michigan. Um, it's an even much smaller program in a state that has uh I grew up in Kansas, so that's always smaller. Kansas is a is a member of our alliance as well, so great. Um, but yeah, for those states that are that have a much smaller population than Michigan, um, think the Delawares and Alaska's and places like that, they they just couldn't afford to run their own program. So it's so that's why we basically come together, we share resources, we talk about ideas, we talk about how to get the word out, and and we, you know, basically we help each other in and the the great thing about this program is it was modeled after the um the freeway toll booths. That's how freeway toll booths it's the same concept of all these states coming together going, how are we gonna do this on our own? Let's let's work together. And that's basically what it was modeled after. So, and it's been really great for Michigan to be part of that National Able Alliance.

SPEAKER_00 37:02

Well, this has been so helpful. And I think, like, first of all, time flies when we're talking about something new, it's really energizing. Because when I first sat down with you, I was like, Oh, I'm starting to work with this client who is financially responsible for her schizophrenic um relative. It's a cousin. Um, and there's just not a lot of family members in that direct descendant line. And so that was an example where we're like, hey, we could get this a type of account where you could be setting aside money and there would you be able to have a debit card if it was appropriate, but you lower the administrative burden. Um, for those of you who are listening thinking, oh, we have this, um, this applies to me, andor we have a family member who we really need to do some longer-term planning. The ABLE accounts um are likely in many cases to be coordinated um with planning, um, other estate planning techniques, like there are special needs trusts and others. So it can be part of a broader conversation, but it's a great example where um just because there's not a sales force out there, um, I'm a huge fan when it comes to 529s, as well as um any type of account that's kind of static and like you're not trading it a lot and things like that. Keeping the costs low, it really should be on your wealth manager or financial planner's menu or list of like, hey, we should think about this when we have circumstances. And certainly my conversations with you, Scott, have helped me to identify more options and opportunities. Do you have any favorite, you know, kind of like examples or stories of how the the accounts have helped?

SPEAKER_03 38:36

Um, yeah, like I said, we've opened up 7,500 accounts, but uh it's so wonderful because we have an outreach team that is literally out in throughout the state, you know, from Muskegon to Detroit to Ironwood, you name it, we're we're out there. Um and it's wonderful hearing from our clients about what are they doing with the money. You know, we talked a lot about the different qualified disability expenses. And, you know, I know I always think about medical costs and and you know, those those really big expenses, but there are so many kids, and I say kids, they're not really minors, they're they're they're adults, but they're just learning about financial management. They're just learning about how to handle their money and and budgeting and oh my gosh, I gotta pay my phone bill next week. So I better not go to Taco Bell tomorrow. And it is so wonderful to be coming from somebody who works for the Michigan Department of Treasury who's long been an advocate for financial literacy, to see some of these people who have been told, nope, just stay broke and you'll be fine. To now they have they have a sense of empowerment, they have the ability to say, you know what? I'm gonna wait, I'm gonna delay gratification and say, I know I have to pay this bill, so let me wait and I'll get those new shoes next month or whatever. Um, but we do, we have lots of clients who are who are utilizing this um for their everyday expenses. But the really fun stories are the clients who have amassed a significant amount of money because they're able to participate on an annual basis, they're able to, you know, do their matching are not matching, but they're able to work contributions, meaning they could save $35,000 a year. And especially the younger kids who are, you know, 18, 19, 20 years old, still living at home, and amassing these really, really significant amounts of money and buying their own condo, you know, and just saying, I want to buy a condo, and they buy their own condo and they have a place to live. And now they are self-empowered. And it's so wonderful to hear those stories of you know, people buying a car and having that ability to have their own transportation and not have to worry about getting a ride from a friend or calling an Uber or getting a bus pass. And it's it's just been a wonderful opportunity for us to do that. Like I said, it's only 7,500 accounts, but it's almost $100 million. That's a hundred million dollars that is being sheltered for and maintaining Medicaid eligibility. It's a hundred million dollars that's not subject to spend down right now, so people can keep their benefits. So um it, you know, I I know it's small, but it it just makes it's one of those programs, like you were saying earlier, Melissa, it's one of those programs that everybody can get behind because there's really not a downside to having people become more economically self-sufficient.

SPEAKER_00 41:18

So yeah, and I think like in many cases, when there's a family member who's accepted responsibility or you're seeking a family member to accept responsibility, I mean, oftentimes the primary caregiver is known, but they are older. And so, you know, when you're trying to make a plan and say this sibling, that niece or cousin is going to be the person who carries the torch, then having a toolkit where you can prepare them to be less um, less potentially vulnerable themselves financially by um, you know, co-coordinating with a plan like this can be extremely powerful. There's just a lot of great use cases. And I really appreciate the opportunity to talk about a new topic, at least one that we haven't talked about on the podcast yet. So,

Where To Learn More And Get Help

SPEAKER_00 42:05

Scott, where can people find more? And if they run into any trouble or need help, um, what do they do?

SPEAKER_03 42:11

Yeah, so everything that we've talked about, um, in addition to our webinars, our outreach materials, um, our requests for outreach are all available on our website. So if you go to Michigan.gov slash myable M-I-A-B-L-E, um, you'll see our website. Um, in addition to all of that outreach type of information, we also have our link to enrollment. Uh, depending on the month, it either says start saving or open an account. But it's really easy to do. Uh, it takes about 15 minutes if you have all the information. And we're gonna need a lot of demographic information to open the account. But the bottom line is most people can do can open an account within 10 to 15 minutes. You can start saving today. The the one thing I like to say, it's an old adage from my grandfather: the best time to start saving was yesterday. The second best time to start saving is today.

SPEAKER_00 42:57

So yeah, why not get started?

SPEAKER_03 42:59

Yeah, yeah, why not get started now? Um, we also have our email address. Um, I mentioned a couple times that awareness is my number one problem. Not enough people know about this product. So we are always looking for outreach events, uh, whether that's a resource booth, a conference, a parent group, a disability advocacy organization, anyone who might benefit from listening to us talk for about 45 minutes about the program, email us myAble M-I-A-B-L-E at Michigan.gov. We're always looking for events. We're always looking for places to be in the community. We travel throughout the state. We're coming up to the point where we won't go to the UP because we're in a Burr month now, September, October. But in the spring, we'll be back.

SPEAKER_00 43:46

So, um, like I said, beautiful place to visit in the summer. I've been there.

SPEAKER_03 43:50

It's a beautiful place to be, but I don't want to cross the bridge in one of the Burr months. Absolutely not.

SPEAKER_00 43:54

So yeah.

SPEAKER_03 43:55

Um, but the bottom line is we we need to get the word out. We we, as I mentioned, there are a million people who are eligible, and we're at less than one percent of our potential population. So anything that we can do to help get the word out, to to help make people aware, to help educate people and to advocate for this program, please let us know. Um, like I said, myable at michigan.gov. And um, we're available to do events. Um, and I'm not sure if I mentioned, we do have a monthly webinar. It's all right third Wednesday of every month at 6 p.m. If you go to our website, you can enroll. Uh, you've got a one in four chance of listening to me, because there's only four of us. Um, but the bottom line is we do the the general enrollment and awareness presentation every month, um, just so the people can come. It is a live webinar. So if you have questions, you can type in a question and we will answer you directly. So it's a great opportunity, even for currently account holders, to say, hey, I've got an issue with my account, or how do I do this? We can answer those questions as well.

SPEAKER_00 44:58

Well, keep up the great work. Um, congratulations on 10 years.

SPEAKER_03 45:01

Thank you so much.

SPEAKER_00 45:02

And glad we could do a little bit more to get the word out.

SPEAKER_03 45:05

I appreciate it. Thank you for the opportunity.

SPEAKER_00 45:07

Thanks so much, Scott.

Support The Show And Disclosures

SPEAKER_02 45:19

Thank you for listening to the Women's Money Wisdom podcast. If you found value in this episode, the best way that you can support the podcast is to forward an episode to a friend or leave a review. Go to ProPlan.com and the podcast link to get all the resources and links mentioned. This presentation by Pro Planning is intended for general information purposes only. No portion of this presentation serves as a receipt of or substitute for personal investment advice from Pro Planning or any other investment professional of your choosing. Copies of Pro Planning's current rent and disclosure brochure and form CRS discussing our advisory services and fees are available upon request or on our website platform at PerlPlan.com. The information that we share is meant to educate and inspire, not serve as personalized financial advice. Everyone's situation is unique, so be sure to consult with your own financial professional for guidance that fits your life. And just so you know, the opinions shared in this podcast are Melissa's own and those of her guest. They don't necessarily represent any organizations with which Melissa is affiliated. For more important disclosures, please go to our webpage at proplan.com.