Could Trump Accounts hurt benefits for children with disabilities?

Could Trump Accounts hurt benefits for children with disabilities? Medora Lee USA TODAY.

Key points

• Illinois raised the age limit for its ABLE savings program from 27 to 47, making regarding 250, 000 more residents eligible.
• Regarding 7.3 million Americans received SSI in August, according to the Social Security Administration's (SSA) monthly snapshot.
• Any child under 18-years-old with a Social Security number has an account in their name that can be asserted in the Trump Accounts app.
• When including those on Social Security Disability Insurance (SSDI), or disability insurance, the numbers double.
• "But we need to be careful that a program designed to help children today doesn't unintentionally hurt children with disabilities tomorrow." Should disabled children skip Trump Accounts?

Could Trump Accounts hurt benefits for children with disabilities? Medora Lee USA TODAY. Illinois expands ABLE accounts to more residents with disabilities.

Illinois raised the age limit for its ABLE savings program from 27 to 47, making regarding 250, 000 more residents eligible. The accounts allow individuals with disabilities to save for expenses like housing and medical bills without losing Medicaid or SSI benefits. Fox – 32 Chicago.

Trump Accounts, touted by the White House as a game-changer to obtain children on the path to building savings, can hurt their access to disability benefits as adults if parents aren't vigilant, financial and legal experts say.

Any child under 18-years-old with a Social Security number has an account in their name that can be asserted in the Trump Accounts app. Individuals, firms, state and local governments, and qualified charities can contribute annually up to a combined $5, 000 to a Trump Account, but $1, 000 of Treasury seed capital is only available to U.S. Children born between 2025 and 2028.

Although new rules now allow donors to provide individual stocks, funds will be invested in low-cost index funds. When accounts basically become traditional IRAs with the same rules, no withdrawals are allowed until the year the child turns age 18. Parents can additionally choose in the year the child turns 18 to convert the account to a Roth IRA. It could result in some taxes.

Those options work for most children turning 18, but not for a disabled child. Retirement accounts count towards an individual's $2, 000 ($3, 000 for a married couple) asset cap to qualify for supplemental security income (SSI), and $1, 000 invested in the stock market from birth to 18 years should easily top that threshold, financial and legal advisers say.

"I applaud any initiative that helps families build financial security for their children, " remarked Thomas Giordano, Jr., founding partner of the national workers' compensation and Social Security disability law firm Pond Lehocky Giordano. "But we need to be careful that a program designed to help children today doesn't unintentionally hurt children with disabilities tomorrow." Should disabled children skip Trump Accounts?

After 18 years, $1, 000 invested in the S&P 500 would grow to approximately $5, 560, for example, assuming the last century's average S&P 500 index return of regarding 10% per year. So, if your child is eligible for the $1, 000 seed funds from the administration, most financial advisers would say take the free funds.

Nevertheless, parents and guardians must mark their calendars to remind them to roll the entire Trump Account into an ABLE account in the calendar year the child turns 17 years old.

ABLE accounts are tax-advantaged savings accounts for individuals who are totally and permanently disabled. Withdrawals for qualified disability expenses are tax free and the account up to $100, 000 isn't counted towards assets and income to qualify for SSI or other federal benefits programs like Medicaid. Medicaid asset thresholds are the same as for SSI in most states.

Funds from the Trump Account rollover doesn't count towards the standard annual ABLE contribution limit. It is $20, 000 for 2026. Contributions up to the full limit can still be created the year of the rollover.

Rollover timing is crucial, advisers remarked. "Before the child turns 18, you must do a one-time, tax-free rollover into an ABLE account, but it must be done before the child's 18th birthday, " remarked John Rafferty, partner and investment adviser representative at Solomon Financial. "It's your only chance to get it out from being included in SSI and Medicaid."

At 18 years, Trump Accouts automatically turn into an IRA that can no longer be rolled into an ABLE account and will count towards the asset threshold, advisers cautioned. The only option then would be to spend down the Trump Account funds and possibly, incur early withdrawal penalties and taxes in accordance with IRA rules. How plenty of Americans receive disability benefits?

When including those on Social Security Disability Insurance (SSDI), or disability insurance, the numbers double. Regarding 7 million Americans have worked long enough to collect SSDI when they became disabled. Another million are spouses or children of the disabled worker who receive SSDI.

Experts remarked there are even more disabled Americans than official numbers show. Plenty of Americans don't even know they're entitled to SSDI and aren't counted, according to a study of 1, 033 adults by Atticus. It advises residents on SSDI. Every U.S. Worker pays on average $588 per year in federal taxes to fund their SSDI coverage, but only 50% of eligible workers claim it, the survey remarked. Only 15% are even aware of the federal insurance program they would qualify for if they were no longer able to work.

And if Americans do know, the benefits are hard to obtain. Regarding 70% of applications are rejected at least once, according to recent SSA data.

Rafferty remarked it took him and his wife concerning two years, mounds of paperwork, interviews, a rejection and two appearances before a judge to obtain SSI for their disabled daughter when she turned 18-years-old.

"Our daughter at least had her mom and I to support her that whole time, " Rafferty remarked. "At the time, my wife wasn't working. I was glad since it was a full time job for her. If I had to do it again, I would hire a lawyer."

Since there are thousands of pages of law that govern disability benefits, an attorney, whether through Atticus or elsewhere, can reduce time to secure approved by regarding 6 months, assist them file faster, win at earlier stage, or appeal faster, industry experts stated. Share your feedback to support improve our site!

For now, could Trump Accounts hurt benefits for children with disabilities? Remains the part of the story worth watching, and further updates are likely as more details are confirmed.