ABLE Savings Accounts for People with Special Needs

ABLE accounts allow people with disabilities to save money without jeopardizing their government disability benefits. Read more about the advantages and limitations of ABLE accounts.

What Is an ABLE Account?

In 2014, Congress signed the Achieving a Better Life Experience (ABLE) Act into law to make it easier for those with disabilities to save money. Importantly, much of the fund won't count against the disabled person's ability to qualify for Supplemental Security Income (SSI) or Medicaid. The money in an ABLE account also grows tax-free. The disabled person can use the funds to pay for "qualified disability expenses" such as education, food, housing, health care, and transportation.

Do You Qualify for an ABLE Account?

To qualify for an ABLE account, an individual must have a disability that began before age 26. (But note that you can create an ABLE account for an individual if they are older than 26, as long as the onset of disability occurred prior to age 26.) This age requirement is obviously limiting, and there are ongoing efforts to change this limitation.

In addition, you'll need to demonstrate that the disability qualifies. If you already receive disability benefits through SSI (Supplemental Security Income) or SSDI (Social Security Disability Insurance), you will automatically qualify for an ABLE Account. Otherwise, you'll need to qualify under Social Security's functional limitations criteria and provide a written diagnosis from a physician.

What Are the Pros and Cons of an ABLE Account?

The biggest advantages of an ABLE account are these:

• The money in an ABLE account won't disqualify a disabled person from receiving SSI and Medicaid benefits. (But note that once the account reaches $100,000, SSI income will be suspended. More on this below.)
• Anyone can put money in the account, including the individual with the disability.
• Any income earned in the account will not be subject to income tax.
• An ABLE account is easy to set up on your own (unlike special needs trusts, discussed below).

ABLE accounts also come with some significant limitations, including the following:

• Each individual can have only one ABLE account.
• Contributions are capped annually. The limit for 2023 is $17,000. (This limit is equal to the annual personal gift tax exclusion, so it will rise periodically.) Also, to be clear, this is per account, not per donor. The owner of the account must keep track of all contributions to ensure that they do not exceed the $17,000 limit for the calendar year. Some states allow an additional amount to be added to the account for disabled individuals who are working, up to the annual federal poverty guideline ($13,590 in 2022) or their annual salary before taxes, whichever is less.
• For many, the account cannot exceed a total value of $100,000. For those who qualify for SSI, the balance of an ABLE account cannot exceed $100,000, or SSI benefits will be suspended. For those who do not qualify for SSI, the account can reach the limit allowed for 529 plans in that state—an amount that varies by state, but ranges from $235,000 to $550,000.
• Unused funds may go to reimburse Medicaid. In most states, if the account owner dies with funds in an ABLE account, those funds must be used (in this order): (1) to pay any outstanding qualified expense bills including funeral expenses, (2) to provide payback to Medicaid for all Medicaid benefits received, and then (3) to be distributed to the account holder's legal beneficiaries. Some states, though, protect ABLE accounts from Medicaid recovery.

State-Specific Information on ABLE Accounts

As with 529 accounts, states run their own ABLE account programs. Each program has its own features. Most state programs allow out-of-state residents, so you have a variety of choices.

To explore the various features of specific state ABLE programs, try the National Resource Center's ABLE program search tool.

Special Needs Trust: Another Option for People With Disabilities

Special needs trusts are another useful option for people who receive disability benefits and want to protect and plan for their financial future. These trusts are designed to 1) provide for people with disabilities by giving them a source of funds that won't count against their eligibility for benefits and 2) name a trustee and a backup trustee to manage the trust for the benefit of the person with disabilities. These types of trusts are subject to strict federal rules, and you'll need a lawyer to set one up. Read more about Special Needs Trusts.