Update on ABLE Act Accounts and 529 Plans for Education

529 Plans (for education expenses) have been popular for years. More recently, Congress authorized similar accounts for most people with disabilities. The so-called ABLE Act accounts are first cousins to 529 Plans — and recent legislative changes have made them even closer relatives. A number of small changes make both kinds of accounts more flexible in individual circumstances. As we discuss in this week’s podcast episode, those changes are actually set to expire in the next two years. But we think the changes will likely be extended, and they are worth knowing more about in any case. 529 Plans have long been available. ABLE Act accounts are more recent. But when Congress adopted the disability accounts, they intended to offer similar opportunities for people to contribute to future needs for children and grandchildren. Both kinds of plans have some tax benefits; ABLE Act accounts have some drawbacks not shared with education accounts. Under current rules, it’s possible to create an education account and use it to fund the disability account. This works even if the donor already knows about the disability. And future extensions of ABLE Act eligibility will make that power even stronger. We think ABLE Act accounts work best as adjuncts to other planning. The integration with 529 education accounts expands and strengthens those planning opportunities.