ABLE accounts are bank accounts that allow people with special needs to save money without jeopardizing their disability benefits. ABLE accounts come from the federal ABLE (Achieving a Better Life Experience) Act, but they are established and managed on a state level.
Not all states have ABLE accounts (yet), and each state will have slightly different rules and procedures for opening and using an ABLE account.
Illinois does have an ABLE program. The program is open to residents and nonresidents, but residents may be eligible for special state tax benefits if they contribute to an ABLE account. As an alternative, Illinois residents can open ABLE accounts in other states that allow it. See additional details below.
When people with special needs apply for disability benefits, they must show that they do not have enough money to support themselves independently. Money saved in a traditional bank account counts against the ability to qualify for disability benefits.
As a result, people with special needs are not able to build savings with the money they earn or that they receive through inheritance or gifts. On a day-to-day basis, this means that people with special needs must live with very little money if they want to receive government aid.
One workaround for this issue is to use a special needs trust which provides a place to save money that can be used for the benefit of the person with special needs (without affecting his or her eligibility for benefits). But special needs trusts must be controlled by a trustee—not by the person with special needs who benefits from the trust. Not only does this leave a person with special needs with little control over his or her finances, it also limits the person's independence.
ABLE accounts fill this gap by giving people with special needs the opportunity to manage a modest bank account without penalty against their eligibility for SSI, Medicaid, or other government benefits.
The basic rules for all ABLE accounts come from the federal ABLE Act. (Read the federal act here: https://www.congress.gov/bill/113th-congress/house-bill/647/). When states adopt and implement the ABLE Act, they must follow the federal rules and can also add their own rules and regulations. Here are some of the federal rules:
When individual states adopt the ABLE Act and provide ABLE accounts for their residents, they may also make rules and policies about:
Illinois' ABLE account program launched in 2017. Here are some details.
In addition to the $16,000 annual contribution, if you are working, you can contribute up to your annual gross salary or $12,880, whichever is less, into your ABLE account for a total of $28,880.
Illinois taxpayers can make tax-deductible contributions to ABLE accounts up to $10,000 per a single filer or $20,000 for married filing jointly filers. Talk to your tax adviser to learn more about this benefit.
You can learn about and compare ABLE accounts across the country at the website for the ABLE National Resource Center.