ABLE Accounts Can Play a Key Role in Special Needs Plans

ABLE accounts can enhance quality of life for people with disabilities, offering financial protection while preserving access to public benefits for some individuals.

Living with a disability can present numerous financial challenges. Many people with disabilities bear the costs of health care, accessible vehicles, assistive technologies, and more. According to the National Disability Institute, households affected by disability require 28 percent more income to maintain the same standard of living as those without disabilities.

Additionally, people with disabilities can face various barriers to employment, putting their financial health at further risk. The U.S. Census reports that year-round workers with disabilities earn 87 cents for every dollar. In part, this is because they are over-represented in low-paying jobs, such as janitorial positions.

With bipartisan support, the Stephen Beck, Jr., Achieving a Better Life Experience (ABLE) Act became law in 2014. It allows eligible individuals with disabilities to set money aside in savings accounts for certain disability-related expenses. This can help people with disabilities cover some of the costs associated with their conditions. According to the Social Security Administration, ABLE account holders have saved over $550 million since the program’s inception.

Using an ABLE account can help individuals with disabilities achieve better financial stability, improving the quality of their lives. These tax-advantaged accounts can also help individuals remain eligible for certain public benefits such as Supplemental Security Income (SSI) and Medicaid.

Who May Use an ABLE Account?

Per the Social Security Administration (SSA), individuals with disabilities must meet certain criteria to become beneficiaries of an ABLE account. For one, the onset of their disability or blindness must have occurred before 26 years of age. (Fortunately, this age limit will shift to 46 years old beginning in 2026.)

In addition, someone whose income or resources exceed the limits for a program like SSI but who otherwise would qualify based on disability or blindness may qualify for an ABLE account.

Also qualified are those receiving disability insurance benefits, childhood disability benefits, or widows with disabilities or widower’s benefits based on blindness or disability beginning before age 26.

Others may access an account through a certification process. This involves submitting a certification stating that the applicant was blind or had a qualifying disability with an onset before age 26. Qualifying disabilities are physical or mental impairments causing marked and severe functional limitations. The certification must also include a copy of the diagnosis signed by a physician.

The SSA’s List of Compassionate Allowances Conditions delineates other specific disabilities that qualify someone.

What Can an ABLE Account Fund?

The purpose of an ABLE account is to offset the financial toll of living with a disability. Unlike a general savings account, an ABLE account can only pay for qualified disability expenses (QDEs). According to the ABLE National Resource Center, QDEs are expenses that support the account holder’s health, independence, or quality of life.

QDEs encompass basic living expenses. These can include the following:

• Education and employment training
• Personal aid services and assistance to manage the disability
• Medical care and health support
• Food
• Housing
• Transportation
• Financial management and administrative services

Qualified disability-related expenses should supplement – but not replace – other support programs, such as SSI and Medicaid.

Making Contributions to an ABLE Account

Anyone can contribute to an ABLE account, such as family, friends, employers, and the account owner. Annual contribution limits align with the gift tax exemption, which is $18,000 in the 2024 calendar year. Investments in an ABLE account can accrue interest.

The designated beneficiary of an ABLE account who works but does not have a retirement plan may be able to contribute an additional amount. The SSA offers further information on the parameters for these additional contributions .

Public Benefits

Keep in mind that the SSA enforces strict income and asset criteria for Supplemental Security Income recipients. In 2024, the income limits are $934 for a single person and $1,415 for a married couple. To receive SSI in most states, an individual cannot have more than $2,000 in countable resources. Married couples, meanwhile, cannot exceed $3,000 in countable resources.

Generally, countable resources include money in bank accounts. However, there is an exception for funds in ABLE Accounts. Under SSA rules, SSI recipients can save up to $100,000 in an ABLE account without it jeopardizing their access to SSI. When funds exceed that amount, the SSA suspends benefits.

ABLE account contributions do not affect one’s ability to qualify for Medicaid. Even those with more than $100,000 in an ABLE account can continue receiving Medicaid.

Tax Advantages

In addition to helping individuals with disabilities stay qualified for public assistance, ABLE accounts offer tax advantages. Similar to a 529 college savings plan, ABLE accounts allow the account holder to grow their savings tax-free.

And although contributions are not tax-deductible, investment earnings are not taxed when used for QDEs. Individuals can invest money in an ABLE account and use the interest to pay disability expenses tax-free.

Consult a Special Needs Planning Attorney

A special needs planner can help you understand how to use an ABLE account to maximize your financial well-being. This type of account can serve as a valuable part of your estate plan.

To incorporate this and other planning tools, such as a special needs trust (SNT), into your estate plan, consult a special needs planning attorney near you. You may also wish to view the list of ABLE account options currently available in your state.