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.
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.
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.
The biggest advantages of an ABLE account are these:
ABLE accounts also come with some significant limitations, including the following:
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 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.