Families caring for a loved one with a disability often face a difficult problem: how to save money for the future without jeopardizing important government benefits like Supplemental Security Income (SSI) or Medicaid.
An ABLE account can help solve this problem.
ABLE accounts are tax-advantaged savings accounts designed specifically for individuals with disabilities. They allow people with disabilities and their families to save money for disability-related expenses while protecting eligibility for important public benefits.
Who Can Open an ABLE Account?
To qualify for an ABLE account, the individual must have a disability that began before age 26. The individual must also either:
- Receive SSI or Social Security Disability Insurance (SSDI), or
- Meet the Social Security definition of disability with certification from a physician.
Each eligible individual may have only one ABLE account, but family members and friends may contribute to it.
Contribution Limits
ABLE accounts have annual contribution limit of $20,000.00 per year.
In some situations, individuals who work may be able to contribute additional funds from their earnings.
Each state’s ABLE program also has a maximum account balance, which is often over $300,000. However, if the account balance exceeds $100,000, SSI benefits may be suspended until the balance drops below that threshold. Medicaid eligibility is typically not affected.
What Can the Money Be Used For?
Funds from an ABLE account can be used for qualified disability expenses that improve the individual’s health, independence, or quality of life.
These expenses can include things such as:
- Housing and rent
- Education and job training
- Transportation
- Healthcare and medical expenses
- Assistive technology
- Personal support services
- Basic living expenses
Because of this flexibility, ABLE accounts can be very useful for covering everyday costs.
Tax Benefits
ABLE accounts also provide valuable tax advantages.
Contributions are made with after-tax dollars, but earnings grow tax-free, and withdrawals are tax-free when used for qualified disability expenses.
How ABLE Accounts Affect Benefits
One of the biggest advantages of ABLE accounts is that they allow individuals with disabilities to save money without losing eligibility for certain government programs.
Normally, individuals receiving SSI cannot have more than $2,000 in assets. However, funds held in an ABLE account are treated differently.
Up to $100,000 in an ABLE account does not count toward the SSI asset limit, allowing individuals to build meaningful savings. Medicaid eligibility is generally not affected by the account balance.
ABLE Accounts and Special Needs Trusts
ABLE accounts are often used alongside Special Needs Trusts, another common planning tool for individuals with disabilities.
ABLE accounts are relatively easy to open and manage, making them helpful for day-to-day expenses. Special Needs Trusts, on the other hand, can hold larger amounts of money and provide more long-term planning flexibility.
For many families, the best approach is to use both tools together: a trust can hold larger inheritances or gifts, while an ABLE account can be used for everyday spending.
Final Thoughts
ABLE accounts have become an important planning tool for individuals with disabilities and their families. They allow individuals to save money, pay for important expenses, and maintain eligibility for essential benefits.
If you have questions about whether an ABLE account is right for your family, it may be helpful to speak with an attorney as part of a larger special needs planning discussion. An ABLE account can be a valuable tool, but it often works best when coordinated with a full plan that may also include a Special Needs Trust, a will, and powers of attorney. Our office helps families create practical plans that protect benefits while providing long-term support and peace of mind.
Stott, Hollowell, Windham & Stancil
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