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Able Accounts: A Valuable Option for People with Disabilities

On December 19, 2014, the US Government enacted the Achieving a Better Life Experience (ABLE) Act. Although not necessarily well known, the ABLE accounts created by this act can be extremely beneficial for those living with a disability. Moreover, the Social Security Administration encourages the creation of these accounts, not only for the great benefits they offer to account owners, but to ensure the account managers have enough assets to make it worthwhile for them to provide this service.

What is the benefit of an ABLE account?


An ABLE account allows for qualified account owners to save for future expenses and purposes with special benefits and advantages. The Act recognized that there are added difficulties for a person with disabilities on certain public benefits to save for the future, and this account makes saving possible without losing these necessary benefits . Amounts in these accounts are invested, and the growth is exempt from federal taxes. The amounts in the accounts will not be considered when assessing SSI Disability benefits up to $100,000, and up to $400,000 account asset is not considered for Medicaid benefits. Some account owners are eligible for a non-refundable Saver’s Credit on their federal taxes. Also, unlike self-settled trusts, the ABLE account assets may be used for funeral expenses. There are other benefits which might apply as well, but these are the primary advantages.


Note that only one ABLE account per social security number may be opened. The contribution limits cannot be exceeded by opening multiple accounts.


Once money is placed in an ABLE account, how may it be used?



Funds from an ABLE account may be used for “qualified disability expenses.” The definition of these expenses is purposely broad, covering health, housing, education, transportation, financial services, employment training, assistive technology, personal support services and basic living expenses. Basically, funds deposited in an ABLE account may be used for a lot of inevitable expenses a person with a disability will incur in the future.


Some ABLE accounts may be accessed through a debit card, which adds to their convenience. Note that different states have different account managers, and it is easier to set up a card in some states than in others. An account may be established in any participating state that the beneficiary resides in, and some states have no residency restrictions for their plans.


Annette Hines, disability attorney and founder of Special Needs Law Group of Massachusetts, PC says, “ABLE accounts are a wonderful tool to use with a young adult to establish a savings plan and teach money skills and independence. It can be essential to a Person Centered Plan!”



Sounds great! How much may be deposited in an ABLE account?


The annual contribution amount that may be deposited in an ABLE account from all sources is tied to the federal annual gift tax exclusion amount. In 2021 it is $15,000 per year, but it is increasing to $16,000 for 2022. An additional amount up to the federal poverty line for a single person (currently $12,760 for 2021 and $12,880 for 2022) may be deposited from the account owner’s income from work if they are not participating in an employer’s work retirement plan.


Who is eligible for these accounts?


Anyone eligible for benefits for disability or blindness under Titles II or XVI of the Social Security Act may open an ABLE account if the blindness or disability occurred before the date on which the proposed account owner turned 26 years old.



Are there any disadvantages to an ABLE account?


There might be some disadvantages – it depends on the individual’s particular circumstances. The owner of the account is the person with the disability. That person has full control over the account, so if that person needs some of the protections offered by establishing a trust with a trustee, an ABLE account might not be the best solution. Additionally, if the account owner passes away, there may be required paybacks to state Medicaid.


Thanks to Annette Hines for assistance with this blog. Learn more about her firm and practice helping people with special needs at www.specialneeds-law.com.


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