Are you Reaping the Benefits of an ABLE Account?

By Andre Sam, Disability & Special Needs Project

When I am meeting with families discussing Comprehensive Disability/Special Needs Planning, an issue comes up regarding the amount of assets being held in the name of the individual with a disability and how they can impact the individual's government-related benefits such as Supplemental Security Income (SSI), Medicaid or the Child's Medicaid Waiver (aka "Katie Beckett"). Oftentimes, right after bringing up that issue/concern, the topic of ABLE Accounts arises.

ABLE Accounts: Father and daughter communicating

What is an ABLE Account?

The conversation often begins with standard questions I receive, such as, "what are ABLE Accounts?", or "what's the difference between ABLE Accounts and these Special Needs Trusts I've heard of?". Sometimes, I will even have someone who simply wants to take action (kudos to them) and say, "I would like to set up an ABLE Account, can you help me do that?"

I have helped many individuals and families set up an ABLE Account. But just like every individual who has approached me wanting to take action and looking for the assistance, my response is the same as it will be with you today… I'd like to "pump the brakes" for a second and start at the beginning, helping you understand ABLE Accounts better so you can further decide whether or not it is appropriate and applicable to yours or your family member's circumstances.

ABLE Accounts were created from the Achieving a Better Life Experience (ABLE) Act of 2014. These "tax-advantaged savings accounts for individuals with disabilities and their families, were created as a result of the passage of the Stephen Beck Jr. Achieving a Better Life Experience Act of 2014 or better known as the ABLE Act. The beneficiary of the account is the account owner, and income earned by the accounts will not be taxed. Contributions to the account, which can be made by any person (the account beneficiary, family, friends, Special Needs Trust or Pooled Trust), must be made using post-taxed dollars and will not be tax deductible for purposes of federal taxes; however, some states may allow for state income tax deductions for contributions made to an ABLE account." (

The idea behind ABLE Accounts is to give disabled individuals the ability to have more funds in an account that is strictly for their benefit without those funds affecting their eligibility for government benefits the way those funds would if they were simply held in a regular checking/savings/investment account that has their name on it.

How Do ABLE Accounts Actually Work?

Have you been discouraging family members from giving money to your disabled loved one because of the concern that those funds will negatively impact them?...

Have you been discouraging your disabled loved one from pursuing employment because of how those funds would impact their benefits?...

Have you, as a parent or grandparent, set aside funds in a 529 education account only to discover years later due to the various factors that your disabled loved one will not be pursuing secondary education and are facing a 10% withdrawal penalty on those funds because they will not be used for
qualified education expenses?...

Deaf girl communicating with mom

ABLE Accounts can help solve each of these issues. Family members can make contributions and those contributions can be deposited into an ABLE Account and, as long as the maximum annual contributions for that disabled individual's ABLE Account do not exceed $16,000 from all parties, those funds can be used for qualified expenses (as defined by the federal government) or can continue to build and grow over time without impacting your disabled loved one's government benefits.

ABLE Accounts also have the ability to have Direct Deposit set up. So your disabled loved one's paycheck can be deposited directly into an ABLE Account without you constantly having to monitor and make sure your disabled loved one's account stays below the maximum asset amount of $2,000 (or $3,000 if married) to remain eligible for government benefits.

Have a 529 account for your disabled loved one?... No problem. ABLE Accounts are designed to allow you to transfer the funds in a 529 account directly over to an ABLE Account for that disabled individual without the 10% penalty. Remember though...the $16,000 max annual contribution still applies with transfers. So you may have to do partial transfers over the course of a couple years. But hey…at least you are not facing the loss of 10% of those funds.

Disability Saving Programs Are National, But Still Vary by State

While this is a federal act that has been created with a certain set rules and provisions that all states have to abide by, each state operates its own ABLE Account program and some states have additional rules and provisions that apply to their state's specific ABLE Account program.

Some states offer tax-deductions for contributions made into an ABLE Account by their respective residences while others do not. Every state has made their own respective decision on which financial institution will serve as the custodian for their respective accounts. And some states have different custodial fees for their accounts than others. The ABLE National Resource Center website offers an interactive United States map giving you the ability to select different states and even compare/contrast different state ABLE Accounts to further help you in your decision making.

Now while these ABLE Accounts are savings accounts, it is important to remember that these are not just ordinary savings accounts that you can go into your local bank or credit union to set up. The chances are high that if you were to try and do so, the bank teller or representative will have no clue what you are talking about. The ABLE National Resource Center is a great place to start and can direct you to each respective states' ABLE Account website. There, you will set up the ABLE Account for your disabled loved one. The application is done online and should only take approximately 30 minutes to complete.

Pros and Cons of ABLE Accounts, Plus Other Options

Now, while ABLE Accounts are a fantastic creation and tool used for planning for yourself or your disabled loved one, it is very important to remember that there are pros/cons to ABLE Accounts and while an ABLE Account might be applicable for one individual, it might not be applicable to another individual, or it might not be the only planning tool needed to ensure yourself or your disabled loved one is able to live the life you would like for them now and/or in the future.

Only one ABLE Account is allowed per individual. ABLE Accounts have a maximum annual contribution amount of $16,000 from all parties (including the disabled individual) for the 2022 calendar year.

So how do you leave assets that are much more than that amount such as a life insurance policy to them? Or other assets that you have designated them as a beneficiary for?...

Even if those assets are under that amount, how do you plan on leaving those assets to them when listing a disabled individual's ABLE Account is not a valid beneficiary?...

Funds inside of an ABLE Account have to be used for qualified expenditures as defined by the federal government in the ABLE Act, such as education expenses, medical expenses, and transportation expenses and others…

What about any expenses you want to provide for yourself or your disabled loved one that fall outside of what has been deemed as a "qualified" expenditure?...

The solution for these issues will involve the creation of one or multiple PROPERLY DRAFTED Special Needs Trusts.

In closing, ABLE Accounts serve a tremendous benefit for many individuals with disabilities and can help promote their short-term and long-term growth and development. There should be research and discussion within the family or with the disabled individual in determining whether or not an ABLE Account is an applicable means of planning specifically for your disabled loved one.

Seeking out a Disability/Special Needs Planner who has knowledge around all the various planning topics that are important to consider is a highly suggested course of action to ensure better comprehension and to ensure you're making the best decisions for yourself and/or your disabled loved one.

Andre Sam will share his considerable expertise in his free Disability and Special Needs Planning Made Easy workshop at Abilities Expo Dallas on Saturday, December 3 at 3:45 pm.

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