ABLE accounts

Abstract: ABLE accounts allow disabled individuals to save additional income without jeopardizing their public benefits like Medicaid or Social Security. Discusses who can qualify, how to open an account, and the differences between ABLE accounts and a special needs trust.

My family recently racked up a number of medical appointments from the string of non-COVID viruses floating around my kids’ school. The cost, after insurance adjustments, for those medical appointments still linger, even months after the doctor visits. But the costs of normal, routine healthcare is diminished tenfold when compared to the costs of healthcare for a disabled person.

While there are federal government programs set up to provide public benefits for disabled people, the programs have not kept up with the rising costs of healthcare, education, and housing. Recognizing the need for more help, the federal government passed the ABLE Act, which allows disabled individuals to save more for expenses related to their disability without jeopardizing their other public benefits.

This article is meant to give an overview of what the ABLE Act is, who qualifies, the logistics of setting up and maintaining an ABLE account, and the differences between an ABLE account and a special needs trust.

Overview

An ABLE account comes from the Achieving a Better Life Experience (ABLE) Act passed by Congress in 2014.The Act authorized state-sponsored, tax-advantaged savings programs for eligible individuals with disabilities without impacting their eligibility for resource-based public benefits like SSI and Medicaid.

In other words, individuals and families can now save money in ABLE accounts for disability expenses of a loved one.

Who qualifies

Millions of individuals with disabilities and their families depend on a wide variety of public benefits for income, health care, and food and housing assistance. Eligibility for these public benefits (SSI, SNAP, Medicaid) require meeting a means/resource test that restricts eligibility to individuals with less than $2,000 in liquid resources, such as cash savings, non-ABLE checking and savings accounts and some retirement funds.

To remain eligible for these public benefits, an individual must remain poor. The ABLE Act is meant to recognize the significant costs of living with a disability by allowing eligible individuals to establish ABLE savings accounts that won’t jeopardize their public benefits.

Eligibility for an ABLE account is limited to individuals with disabilities that started before 26 years of age. Here’s a breakdown:

  • Meet age requirement + receiving SSI and/or SSDI benefits = automatically eligible

  • Meet age requirement BUT not receiving SSI and/or SSDI benefits = still eligible IF you meet Social Security’s definition and criteria for functional limitations + receive a letter of disability certification from a licensed physician.

It should also be noted that the eligible individual is both the account owner AND the beneficiary of the account assets. Other individuals can open and maintain the account for the benefit of the account owner, but they would have no beneficial interest in the account.

Setting Up and Maintaining an Account

Currently, the total amount per year that can be contributed to an ABLE account is $16,000. The total limit over time that could be made to an ABLE account will be subject to the individual state and their limit for education-related 529 savings accounts. Each state has its own set limit for total allowable ABLE savings.

So if your state has enacted an ABLE program, look here to find your state’s resource page. But don’t despair if you live in the handful of states that have not enacted an ABLE program - you’re free to enroll in any state’s program provided the program is accepting out-of-state residents. As of January 2022, there are 49 ABLE plans nationwide inviting eligible individuals to open an ABLE account. When comparing state ABLE plans, consider the following questions to find a program that best meets your needs:

  • What documentation will an ABLE program require from you to open an account?

  • Is there a minimum contribution to open an ABLE account?

  • If there a fee to open an account, and if so, how much is that fee?

  • Is there a required minimum annual contribution?

  • If there are fees, are they front-end loaded or are they reduced if you leave your funds invested for several years?

  • Are there restrictions on how often you can withdraw funds from your account?

  • What are the investment options the state ABLE program offers?

  • Does the state program offer a state income tax for contributions to their account?

  • Is there a debit card/purchasing card available with the program?

The owner of an ABLE account must spend the money in the ABLE account on a “qualified disability expense,” which means any expense related to the designated beneficiary as a result of living a life with disabilities. Examples include education, food, housing, transportation, employment training and support, assistive technology, personal support services, healthcare expenses, financial management and administrative services and other expenses which help improve health, independence, and/or quality of life.

Differences between an ABLE account and a special needs trust

If you read my article on trusts , then you may be wondering why a loved one would do an ABLE account rather than a special needs trust for a disabled loved one. There are a variety of reasons to do one, or the other, or both, and the chart below is meant to summarize some of the basic differences between an ABLE account and a special needs trust. The bottom line is that trusts generally require much more work, supervision, and expense than setting up an ABLE account.

By Katie Martens

Abstract: ABLE accounts allow disabled individuals to save additional income without jeopardizing their public benefits like Medicaid or Social Security. Discusses who can qualify, how to open an account, and the differences between ABLE accounts and a special needs trust.

My family recently racked up a number of medical appointments from the string of non-COVID viruses floating around my kids’ school. The cost, after insurance adjustments, for those medical appointments still linger, even months after the doctor visits. But the costs of normal, routine healthcare is diminished tenfold when compared to the costs of healthcare for a disabled person.

While there are federal government programs set up to provide public benefits for disabled people, the programs have not kept up with the rising costs of healthcare, education, and housing. Recognizing the need for more help, the federal government passed the ABLE Act, which allows disabled individuals to save more for expenses related to their disability without jeopardizing their other public benefits.

This article is meant to give an overview of what the ABLE Act is, who qualifies, the logistics of setting up and maintaining an ABLE account, and the differences between an ABLE account and a special needs trust.

Overview

An ABLE account comes from the Achieving a Better Life Experience (ABLE) Act passed by Congress in 2014.The Act authorized state-sponsored, tax-advantaged savings programs for eligible individuals with disabilities without impacting their eligibility for resource-based public benefits like SSI and Medicaid.

In other words, individuals and families can now save money in ABLE accounts for disability expenses of a loved one.

Who qualifies

Millions of individuals with disabilities and their families depend on a wide variety of public benefits for income, health care, and food and housing assistance. Eligibility for these public benefits (SSI, SNAP, Medicaid) require meeting a means/resource test that restricts eligibility to individuals with less than $2,000 in liquid resources, such as cash savings, non-ABLE checking and savings accounts and some retirement funds.

To remain eligible for these public benefits, an individual must remain poor. The ABLE Act is meant to recognize the significant costs of living with a disability by allowing eligible individuals to establish ABLE savings accounts that won’t jeopardize their public benefits.

Eligibility for an ABLE account is limited to individuals with disabilities that started before 26 years of age. Here’s a breakdown:

  • Meet age requirement + receiving SSI and/or SSDI benefits = automatically eligible

  • Meet age requirement BUT not receiving SSI and/or SSDI benefits = still eligible IF you meet Social Security’s definition and criteria for functional limitations + receive a letter of disability certification from a licensed physician.

It should also be noted that the eligible individual is both the account owner AND the beneficiary of the account assets. Other individuals can open and maintain the account for the benefit of the account owner, but they would have no beneficial interest in the account.

Setting Up and Maintaining an Account

Currently, the total amount per year that can be contributed to an ABLE account is $16,000. The total limit over time that could be made to an ABLE account will be subject to the individual state and their limit for education-related 529 savings accounts. Each state has its own set limit for total allowable ABLE savings.

So if your state has enacted an ABLE program, look here to find your state’s resource page. But don’t despair if you live in the handful of states that have not enacted an ABLE program - you’re free to enroll in any state’s program provided the program is accepting out-of-state residents. As of January 2022, there are 49 ABLE plans nationwide inviting eligible individuals to open an ABLE account. When comparing state ABLE plans, consider the following questions to find a program that best meets your needs:

  • What documentation will an ABLE program require from you to open an account?

  • Is there a minimum contribution to open an ABLE account?

  • If there a fee to open an account, and if so, how much is that fee?

  • Is there a required minimum annual contribution?

  • If there are fees, are they front-end loaded or are they reduced if you leave your funds invested for several years?

  • Are there restrictions on how often you can withdraw funds from your account?

  • What are the investment options the state ABLE program offers?

  • Does the state program offer a state income tax for contributions to their account?

  • Is there a debit card/purchasing card available with the program?

The owner of an ABLE account must spend the money in the ABLE account on a “qualified disability expense,” which means any expense related to the designated beneficiary as a result of living a life with disabilities. Examples include education, food, housing, transportation, employment training and support, assistive technology, personal support services, healthcare expenses, financial management and administrative services and other expenses which help improve health, independence, and/or quality of life.

Differences between an ABLE account and a special needs trust

If you read my article on trusts , then you may be wondering why a loved one would do an ABLE account rather than a special needs trust for a disabled loved one. There are a variety of reasons to do one, or the other, or both, and the chart below is meant to summarize some of the basic differences between an ABLE account and a special needs trust. The bottom line is that trusts generally require much more work, supervision, and expense than setting up an ABLE account.