It's hard to think about building assets for the future when you get public benefits and don't have much income. Furthermore, programs like Supplemental Security Income (SSI) and Colorado Works have resource limits that make it hard to save money.

However, there are ways of building your assets, even if you are on public benefits and have low income.

Building your assets means saving money or making investments by putting money in the bank, buying stocks, putting money into a retirement account, or buying a home. It’s important to build your assets, because assets help you:

• Become financially secure and more independent
• Deal with unexpected expenses that may come up, and
• Achieve your goals, like paying for school, going on vacation, buying a computer, starting a business, or owning a home.

Financial Literacy

"Financial literacy" means having a general understanding of how to manage your money. Over time, financial literacy can help you do big things, like pay for college, buy a house, or have money during old age. It can also help you stay away from scams and be ready for unexpected expenses and difficult life events.

Financial literacy is especially important for people with disabilities, because they often:

• Spend more on everyday activities
• Have high medical costs, and
• Get public benefits that have rules and restrictions about money and assets.

A tax-free ABLE account lets people with disabilities save money without affecting their benefits. It also allows family and friends to give them money to use for a variety of expenses.

If you have a disability that meets Social Security’s standards (there are separate disability standards for children or youth, for adults, and for blindness) and your disability began before you turned 26, you can open an ABLE account. This can help you:

• Build assets in an account that has tax advantages. Your investments in an ABLE account won’t be taxed, so your wealth will grow faster. If you work and save earned income in your ABLE account, you may qualify for the federal Saver’s Credit. If you have your ABLE account with Colorado ABLE, you may also get a state tax deduction for contributions you make.
• Use your savings on many types of expenses. There are rules about spending the money in your ABLE account, but there’s also a lot of flexibility.
• Save up money without losing benefits. Many benefits programs have resource limits, but:
  • You can have up to $100,000 in your ABLE account and keep getting Supplemental Security Income (SSI) benefits, as long as you meet all other SSI rules. If you go over $100,000, SSI benefits will stop, but they will start up again if your ABLE account drops back below $100,000 and you won't have to reapply.
  • No matter how much you have in your ABLE account, the money in it won’t affect Health First Colorado (Medicaid), Colorado Works, the Health First Colorado Buy-In Program For Working Adults With Disabilities (Medicaid Adult Buy-In), Supplemental Nutrition Assistance Program (SNAP), and most other programs with resource limits.

The bottom line: An ABLE account means that you can save up money without losing your benefits. It also allows family and friends to give you money without affecting your benefits.

ABLE account rules are introduced below and covered in detail in DB101's ABLE Accounts article.

Opening an ABLE Account

An ABLE account is easy to set up, and you don't need a lawyer or other advisor. You can open your own ABLE account or, if needed, it can be opened for you by a parent, a legal guardian, or someone with a valid power of attorney.

Some states offer ABLE accounts and others don’t. Colorado's ABLE account program is Colorado ABLE.

If you qualify for an ABLE account, you can open one in any state that offers a nationwide program. Although you can only have one ABLE account at a time, you can switch your ABLE account from one state program to another. The ABLE National Resource Center lets you see the ABLE account options in different states, compare programs from three different states, or search by ABLE account features.

Rules about ABLE Account Money

There are two limits on how much can be put in an ABLE account in a calendar year:

• Up to $17,000 from any source (including your family and friends, your benefits, and other unearned income
• Another $13,590 from your own earned income (if you have a job).
  • Note: If you or your employer make contributions to a retirement plan set up by your employer, you might not qualify for the extra ABLE contribution amount based on having a job (you can still make regular ABLE contributions). If you aren't sure about this, ask your ABLE account program or check with a tax expert. Get more information about this rule from the ABLE National Resource Center.

Note: This means that if you earn $13,590 or more, you could have a total of up to $30,590 go into your ABLE account in a year. If you earn less than $13,590, the most you can contribute is equal to the amount you earned that year plus $17,000.

Important: Colorado ABLE will automatically stop accepting deposits for the rest of the year once $17,000 has been deposited in the account (unless you submit paperwork to deposit more than that amount). Not every state does this automatically, so if you have your ABLE account in a different state, you may need to keep good records, to make sure that too much money isn’t put into your account.

The money in an ABLE account must be used for certain qualified expenses, like basic living expenses, health and wellness, education, job training, or housing. Many expenses qualify. It's your job to make sure an expense qualifies, and to keep records of how you use your ABLE account money.

If you take money out of an ABLE account but do not use it for qualified disability expenses, you might have to pay income tax on it plus a 10% penalty, and it could affect SSI and other benefits.

Learn more about the rules for spending ABLE money in DB101's article on ABLE Accounts.

If you save money in an Individual Development Account (IDA), the IDA program’s sponsor or financial institution will match the money you save. The match may be anywhere from one to four times the amount you deposit. For example, if your IDA program has a 2:1 match and you deposit $50 into your account, the program will add an additional $100 towards your savings goal, so that your total savings for that month will be $150!

To open an IDA:

• For most IDA programs, your annual income must be 200% of the Federal Poverty Guidelines (FPG) or less ($29,160 per year for individuals). Some programs have higher limits, and you may qualify if your income is 65-85% of the median income in your area.
• You must have earned income from a job or your own business
• You have to take financial literacy classes about things like money, debt reduction, developing a savings plan, credit, and investing; and
• Depending on the program, you may also need to be a U.S. citizen or permanent resident.

You also have to use the IDA to save money for an approved goal. IDA programs usually allow one of the following goals:

• Buying a first home
• Paying for education or training costs, or
• Funding a small business.

Most IDA programs only let you save a limited amount of money in your account, usually $4,000 to $6,000. This includes the money you deposit plus the matching funds. Once you reach the limit, you won’t be allowed to deposit any more money into the account. IDA programs also limit how long you can save (usually three years).

Finding and Applying for an IDA

Once you’ve decided to do an IDA, you must take several steps to enroll in an IDA program:

1. Decide how much money you plan to save and what you are going to do with it. You could use the money for something that will help you with your education, with your small business, or with buying a home.
2. Find an IDA program in your area: Prosperity Now provides a map of financial programs by state, including IDAs.

   • Note: There aren't as many IDA programs as there used to be. Some are still active, but it can take a bit of effort to find one that is accepting applications.

3. Find out as much as you can about the IDA program you are considering.
   • How is the program funded? Is it federally funded?
     • If the IDA program is federally funded, money deposited and matched in that account will not be counted by SSI or Health First Colorado (Medicaid). That means it will not impact your benefits.
     • If you enroll in an IDA that is not funded by the federal government (for example, an IDA funded by a nonprofit or private company), the money in your IDA may cause you to lose your SSI and Health First Colorado (Medicaid) benefits.
   • Does the program fund your goal?
     • Federally funded programs only let you save for small businesses, higher education, and the purchase of a first home.
     • Some privately funded IDAs may let you save for other goals, like buying a new computer or car.
4. Go to an orientation meeting to learn more about an IDA program that interests you.
5. If you decide to enroll, give the required personal and financial information to make sure you qualify for the program.

After you have been accepted into an IDA program, you will be given an IDA caseworker who will help you with your account. You’ll open a savings account with a bank or credit union that is tied to your IDA program. Depending on the program, you may need to deposit a certain amount of money into your account each month.

Usually, if you get Supplemental Security Income (SSI) benefits and have income from a job or from another benefits program, like Social Security Disability Insurance (SSDI), your SSI benefits amount will go down. Also, if you save up too much money in a bank account or build your assets in any other way, you could lose your SSI benefits if you go over SSI's resource limit ($2,000 if you’re single, $3,000 for couples).

Social Security’s Plan to Achieve Self-Support (PASS) program lets people who get SSI earn more money and save that money in a special type of account. There are two main benefits:

• You can save up resources without losing your SSI benefits.
• The income you put into your PASS won’t be counted as income by SSI, so it won't make your benefits amount go down.

The money that you save has to be used for a work-related goal you choose, such as:

• The cost of school or training
• Starting a business, or
• Paying for equipment, support services, and other expenses related to your work goal.

Note: If you already go to college or have a job, you can set up a PASS to help pay for your current work, school, or health expenses.

Applying for a PASS

To set up a PASS, you must:

• Get SSI benefits or become eligible for SSI benefits as a result of an approved PASS application.
• Have a source of income other than SSI (for example, SSDI benefits or wages from a job) or have resources over $2,000 that you can use to fund your PASS.
• Choose a work goal that will help you earn enough money to lower your SSI benefits or get off SSDI benefits altogether.
• Write a plan that shows how saving a certain amount of money will let you reach your work goal. A Social Security PASS specialist can help you write your plan.
• Be under age 65. If you are 65 or older, you may be able to set up a PASS if you were getting SSI benefits based on disability or blindness in the month before your 65^th birthday.

On the PASS application form, you must describe your goals and how you plan to achieve them. This description should be detailed enough to convince Social Security that:

• You have a clear plan
• The plan is realistic, and
• If you complete the plan, your need for SSI benefits will go down or you won't need SSDI at all.

If you do not yet have a clear goal or way to achieve it, try working on one with an organization like the Division of Vocational Rehabilitation (DVR), Blind and Low Vision Services (BLVS), or an Employment Network (EN) through the Ticket to Work program.

Using a PASS

After Social Security approves your plan, they'll send you instructions about how to keep good records and make sure your PASS funds and expenses are separate from your other money. Follow these rules carefully.

If a medical situation or some other issue comes up that impacts your ability to continue your PASS, talk to your PASS specialist about your options. You may be allowed to put your PASS on hold for up to 12 months without having to re-apply.

Tax credits can help you save money and build assets. A few important credits include:

• The Child Tax Credit (CTC)
• The Credit for the Elderly or Disabled
• Colorado Home Modification Tax Credit, and
• The federal and state Earned Income Tax Credits (EITCs).

To get any of these tax credits, you must file your taxes!

Child Tax Credit (CTC)

The Child Tax Credit (CTC) gives parents with children under age 17 up to a $2,000 tax credit for each child. Eligible families must be working and earning at least $2,500 a year.

Note: If you get Supplemental Security Income (SSI) benefits and get money from a CTC, you should spend it within 12 months. After 12 months, Social Security will count that money toward SSI's resource limit.

Credit for the Elderly or Disabled

If you or your spouse is a U.S. citizen who got taxable disability income and was permanently and totally disabled during this tax year, you may be eligible for the Credit for the Elderly or the Disabled.

Colorado Home Modification Tax Credit

Colorado residents with an illness, impairment, or disability can get a tax credit of up to $5,000 per person to retrofit their home for greater accessibility and independence. To get the tax credit, the retrofit must be completed in tax years from 2019 to 2023. Learn more about the Home Modification Tax Credit.

Earned Income Tax Credits (EITCs)

If you have low income, Earned Income Tax Credits (EITCs) may help lower your federal and state income taxes. Even if you don’t earn enough money to owe federal and state income taxes, you may be able to get the federal and state EITCs. Many people who qualify for EITCs don’t get them, because they don’t know they could or they don't file their taxes.

To qualify, you must have income from employment, self-employment, or employer-paid disability benefits that is below certain limits and you must file your federal and state taxes.

The amount you get from your EITCs depends on your Adjusted Gross Income (AGI), whether you are married, and the number of children you have. For 2023 (filing taxes by April 2024), the federal EITC ranges from $2 to $7,430.

The Colorado EITC is 20% of the Federal EITC, or $0 to $0. For example, if your federal EITC is $4,000, your Colorado EITC is $800.

Qualifying Children

A child must meet some requirements to be considered a “qualifying child” for an EITC:

• Relationship: The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of these (for example, your grandchild, niece, or nephew).
• Residence: The child must live at the same residence as you for more than half the year and have a valid Social Security number.
• Age: At the end of the tax year, the child must be 18 or younger. Or, if going to school full-time, the child must be 23 or younger. The only exception is if your child is permanently and totally disabled, in which case there is no age requirement.

A qualifying child can only be listed on one tax return for an EITC.

How to Get an EITC

To claim a federal EITC, you must file a federal tax return, IRS Form 1040. If you have a qualifying child, be sure to attach a Schedule EIC.

To calculate the value of your EITC, you can use the Earned Income Credit Worksheet in your 1040 instruction booklet. Or you can ask the IRS to calculate it for you by noting an “EIC” on the Earned Income Credit line on your tax return.

To see whether you qualify for an EITC and how much you might get, use the IRS EITC Assistant.

To claim a state EITC, you must file a state tax return. Learn more about the Colorado Earned Income Tax Credit.

A trust is a legal arrangement in which a person or organization manages assets for someone else. The trust's assets can then be used to make payments for that person's expenses. The person whose expenses are paid for by a trust is called the “beneficiary” and the person or organization who is managing the assets is the “trustee.” Many kinds of assets can be put into a trust, such as cash, stocks, bonds, and real estate.

Some kinds of trusts (called Special Needs Trusts, Supplemental Care Trusts, or Supplemental Needs Trusts) can be set up to hold assets for a person with a disability. When in a Special Needs Trust, the assets do not affect the person's eligibility for programs like Supplemental Security Income (SSI), Health First Colorado (Medicaid), and Section 8. That means that if you are the beneficiary of a Special Needs Trust, your trust can have more assets in it than the resource limits for benefits programs usually allow. This can let you be more secure financially without losing your benefits. For more details, see Social Security's information about Special Needs Trusts and SSI eligibility.

The trust must be set up correctly. If your Special Needs Trust is not set up correctly, the assets in your trust might be counted toward public benefits resource limits and you could lose your public benefits. And after you die, the type of Special Needs Trust that was set up determines whether or not the assets in the trust have to be used to repay the government for any Health First Colorado (Medicaid) expenses.

Special Needs Trust Rules

While public benefits, such as SSI, Health First Colorado (Medicaid), and HUD housing benefits, offer basic support for food, shelter, and medical care, a Special Needs Trust can be used to pay for other things. For example, money from the trust could be used to pay for your recreation expenses, telephone bill, education, and vacations. Money from a Special Needs Trust should not be used for expenses that are already paid for by one of your public benefits, or this might affect your benefits. Some Special Needs Trusts say specifically that the money cannot be used to pay for these types of expenses.

Additionally, the funds in some types of Special Needs Trusts can be used to benefit only you; no one else can benefit from the trust unless it is what is called a Third Party Trust. And while the trust is typically set up to help you, payments should not be made directly to you. Payments made directly to you count as income and may affect your benefits.

Only the trustee can handle the money from the trust. When you need to pay a provider for something that is not food or shelter, the trustee will pay the money from the trust directly to the provider. In some cases, the trustee may give you regular monthly cash payments, to increase your sense of independence, but the trustee must make sure the the amount you are given does not exceed the income limits for your public benefits.

The three most common types of Special Needs Trusts are:

• Disability Trusts (also called Self-Settled Trusts)
• Pooled Trusts, and
• Third Party Trusts.

Each type of trust has its advantages and disadvantages, and the right type for you depends on your specific circumstances. These types of trusts are explained below.

Note: If you get (or are applying for) Health First Colorado (Medicaid) and a trust is set up to benefit you, the trust must be reviewed (and for some types trusts, officially approved) by Health First Colorado (Medicaid).

Disability Trusts

Disability Trusts, sometimes called Self-Settled Trusts, are used if you have accumulated assets, inherited assets, or gotten assets from a court settlement. In these situations, you actually own the money.

A Disability Trust can be set up by you, your parent, grandparent, or legal guardian, or by a court. To qualify, you must be under 65 years old and must have a disability that meets Social Security's standards. If your disability doesn't meet these standards, you cannot have this type of trust.

After you die, any money left in the Disability Trust will be used to pay back the state for the total amount of money it spent on Health First Colorado (Medicaid) benefits for you. If money is still left over after the state has been paid, the trustee will give it to whomever is listed to get the money after you die.

Pooled Special Needs Trusts

A Pooled Trust can be set up by you, your parent, your grandparent, or your legal guardian, or by a court. Also called Self-Settled Pooled Trusts, this type of trust uses the assets from different people and puts them into a large investment fund. Although the funds are pooled (used together), you still have your own separate account. To have a Pooled Trust, you must have a disability that meets Social Security's standards and be under age 65 (or if you are 65 or older, you might have to wait a period of time before you get benefits from the trust).

A Pooled Trust is set up through a nonprofit organization. The nonprofit organization will administer the Pooled Special Needs Trust, take care of all the tax preparation, make investment decisions, and act as the trustee.

A Pooled Special Needs Trust can be set up so that after you die any money left in the trust is used to pay back the state for the amount of money it spent on Health First Colorado (Medicaid) for you. Or, in some cases, the remaining money can be kept ("retained") in the trust.

Third Party Trusts

A Third Party Trust can be set up by your parent, your grandparent, your legal guardian, or the court, using their own money, including money coming as an inheritance. As long as the trust is set up correctly (with money from other sources and not your own money), a Third Party Trust does not have to repay the government for any Health First Colorado (Medicaid) expenses.

Parents usually set up and supply the money for Third Party Special Needs Trusts, often through their wills and sometimes by purchasing life insurance payable to the trust. These types of trusts are often set up for a child with a disability, but they can also benefit a child or children (or other person or other people) without a disability. A parent can set up a trust for a child of any age, from a baby up to a senior. For example, a mother who is 90 years old could set up a trust for her 65-year-old daughter.

Other family members, such as grandparents, aunts, and uncles, can also put money into this type of trust. The only person who cannot place money into this type of trust is you, the person who will be the beneficiary of the trust.

Some parents place their property in a "living" trust and leave instructions that a separate trust will be created for their child upon their death. This type of trust is often effective immediately. Anyone can give money to the trust by either writing a check or writing a will naming the trust as the beneficiary.

If you get SSI, the money from a Third Party Special Needs Trust should not be used for housing, food, or medical expenses. Housing and food are considered "basic needs" under Social Security laws. If you are getting free housing or food from someone else, including a family member or a trust, your SSI benefits can be reduced or stopped.

Note: Money from an ABLE account that is used for housing or food will not reduce SSI benefits. An ABLE account can be used in combination with a Special Needs Trust. Learn more about ABLE accounts.

When creating a Third Party Special Needs Trust, whoever sets up the trust must decide who will get any assets that are left in the trust after you die.