ABLE Account Expertise

What is an ABLE account?

Securing a financial future is especially critical for people with special needs. The Achieving a Better Life Experience Act, or ABLE Act, allows qualified individuals and/or their families to create a tax advantaged ABLE savings account without impacting their eligibility for needs-based public benefits like SSI and Medicaid. At the time of the ABLE Act’s passing, individuals with more than $2,000 in assets were not eligible to keep those benefits. This rule posed a problem for people who received a settlement, inheritance, or other lump sum of money. An ABLE account is one way to mitigate this issue so that a beneficiary can have income while keeping SSI and Medicaid eligibility.

ABLE account rules

Who can have an ABLE account?

Individuals who are eligible for an ABLE account must be one of the following:

  1. Eligible for SSI based on disability or blindness that began before age 26,
  2. Entitled to disability insurance benefits (DIB), childhood disability benefits (CDB), or disabled widow’s/widower’s benefits (DWB) based on disability or blindness before age 26, or
  3. Certified as being blind or having an impairment that meets the government’s criteria and that the blindness or impairment occurred before age 26.

A beneficiary can open his or her own ABLE account, or a person with signature authority can establish and administer the account if the beneficiary is incapable. The person with signature authority must be a parent, legal guardian, or someone acting under power of attorney. An individual can only have one ABLE account, and the beneficiary is always considered the owner of the account – no matter who manages it.

Contributing to an ABLE savings account

Anyone can contribute to a person’s ABLE bank account, but there are federally mandated annual contribution limits. In 2021 per the IRS:

  • The total annual contributions that an ABLE account can receive from all sources is $15,000.
  • Additional contributions can be made by certain employed ABLE account beneficiaries up to his or her compensation for the tax year, or the poverty line amount for a one-person household, whichever is less. The contribution limit is determined using the poverty guideline applicable in the state where the beneficiary lives. However, the beneficiary is not eligible to make this additional contribution if his or her employer contributes to a workplace retirement plan.

It’s also important to note that the Tax Cuts and Jobs Act of 2017 allows the beneficiary of an ABLE account to claim the saver’s credit for contributions.

Paying for expenses from an ABLE account

An ABLE account can pay for what’s known as qualified disability expenses (QDEs), which are related to the special needs of the beneficiary. QDEs include (but are not limited to):

  • Basic living expenses
  • Education
  • Housing
  • Transportation
  • Employment training and support
  • Assistive technology and services
  • Personal support services
  • Health, prevention, and wellness
  • Financial management and administrative services
  • Legal fees
  • Expenses for ABLE account oversight and monitoring
  • Funeral and burial expenses

ABLE accounts by state

An ABLE program can be established by a state, state agency, or instrumentality of a state. There are different types of arrangements from state to state. Some states:

  • Have partnerships that improve access for eligible individuals to enroll,
  • Have their own ABLE program but have joined with other states in order to provide lower administrative costs and better investment options,
  • Established an ABLE program but contract with private companies to manage their program,
  • Established an ABLE program but contract with other states to manage their program, or
  • Do not operate their own ABLE program, but partner with another state to offer that state’s program to its residents.

Eligible individuals can open an ABLE account in any state; they do not need to create an account from the state administered plan where they live.

Interested in an ABLE account? Our team of experts can help.

Milestone is a national settlement planning firm that has helped many beneficiaries, or their families, establish ABLE accounts. If you are considering your settlement planning options for yourself, your family member, or your client, we welcome you to contact us to discuss this avenue in depth.

Frequently Asked Questions

Where can I open an ABLE account?

You can establish an ABLE account in any state – it does not have to be the state you live in. You can visit a state’s plan website to enroll. We would be happy to give you a few pointers before you take on the task yourself. Feel free to give us a call.

Can an ABLE account be used for food?

Food is considered a qualified disability expense (specifically a basic living expense), so an ABLE account can be used for the beneficiary’s food and groceries.

Can an SSI recipient put payments in ABLE account?

Individuals are eligible to open and pay into an ABLE account if they have SSI because of a disability or blindness that began before age 26.

What happens to an ABLE account at death?

When a beneficiary with an ABLE account passes away, funds remaining in the account will be used to finish paying all outstanding QDEs and may then reimburse the state for Medicaid benefits that he or she received.