How the Achieving a Better Life Experience (ABLE) Act Benefit People With Disabilities

What Is an ABLE Account?

The Achieving a Better Life Experience (ABLE) Act established tax-advantaged accounts for people with disabilities. These accounts allow eligible individuals to save money that grows tax-free and can be used for qualifying disability-related expenses.

Before Congress passed the ABLE Act in 2014, a person with disabilities who had more than $2,000 in their name could lose important benefits, including Medicaid coverage or Supplemental Security Income (SSI).

ABLE accounts give people with disabilities the ability to save more than $2,000 within certain guidelines without automatically losing these benefits.

Who Qualifies for an ABLE Account?

To qualify for an ABLE account, the beneficiary must have become blind or disabled before reaching the age of 26.

When opening an ABLE account, the person with a disability may or may not need to provide documentation. This depends on whether they already receive Medicaid coverage or SSI benefits.

• Individuals already receiving Medicaid or SSI generally do not need to provide additional documentation.
• Individuals who are not receiving these benefits may self-certify their eligibility with supporting documentation from a doctor.

Understanding eligibility requirements is important because ABLE accounts can provide additional financial flexibility while helping protect access to essential benefits.

ABLE Account Contribution Limits and Growth Rules

The annual contribution limit for an ABLE account is $14,000. This limit helps prevent the account from triggering the federal gift tax.

ABLE accounts also have a growth limit. The account balance cannot exceed $100,000 without affecting certain benefits.

• If an ABLE account exceeds $100,000, Supplemental Security Income (SSI) payments may be suspended.
• SSI payments can resume once the account balance falls below the $100,000 limit.

Choosing the Right ABLE Account Plan

ABLE accounts are administered at the state level. However, an individual does not always need to open an account in their home state.

It can be beneficial to compare different ABLE account options to find the plan that best fits the disabled person’s needs.

Some factors to consider include:

• Account fees: Different plans may have different costs associated with maintaining the account.
• Access to funds: Some accounts offer features such as debit cards, which may be helpful when immediate access to funds is needed.
• Investment options: Some plans may provide different ways for funds to grow over time.

An attorney and financial planner can help determine which ABLE account option best meets an individual’s needs and long-term goals.

What Expenses Can an ABLE Account Cover?

Under the ABLE Act, funds in an ABLE account can pay for “qualified disability expenses.” The law defines these expenses as:

“Expenses related to the eligible individual’s blindness or disability which are made for the benefit of an eligible individual who is the designated beneficiary.”

ABLE accounts can cover many different disability-related costs, including:

• Housing expenses
• Transportation
• Assistive technology
• Support services
• Health, prevention, and wellness expenses
• Employment training
• Education expenses
• Funeral and burial expenses

Many people are unaware of the full range of expenses an ABLE account can cover. Speaking with an experienced professional can help ensure the account provides the greatest possible benefit.

Keeping Records for ABLE Account Expenses

Individuals who use an ABLE account should keep receipts and records for all expenses paid through the account.

The Internal Revenue Service (IRS) regulates ABLE accounts. Maintaining detailed records can help provide documentation if the account is audited or if an expense is questioned.

It may also be helpful to document how each expense relates directly to the individual’s disability. Proper record keeping creates a clear history of how ABLE account funds were used.

ABLE Accounts and Special Needs Planning

ABLE accounts can provide valuable benefits for many Americans with disabilities. However, many families also continue to use other planning tools, such as special needs trusts and other financial strategies.

Choosing an ABLE account does not prevent someone from using other planning options. In some situations, individuals may benefit from having both an ABLE account and a special needs trust.

Each option provides different advantages, and the best approach depends on the person’s unique financial situation, needs, and long-term goals.

ABLE accounts are one important tool that can help families plan for the future of people with disabilities.

Frequently Asked Questions About ABLE Accounts

What is the purpose of an ABLE account?

An ABLE account allows eligible individuals with disabilities to save money while maintaining access to certain benefits, such as Medicaid and SSI, when account rules are followed.

Can ABLE accounts replace special needs trusts?

No. ABLE accounts and special needs trusts serve different purposes. Some individuals may benefit from using both as part of a broader disability planning strategy.

What can ABLE account funds be used for?

ABLE account funds can be used for qualified disability expenses, including housing, transportation, education, healthcare-related costs, assistive technology, and other approved expenses.

If you would like to discuss ways we can help, please contact our office at (352) 565-7737. Conversations are complimentary.