ABLE Savings Accounts for Individuals With Disabilities Preserve SSI and Medicaid Eligibility

Congress passed a federal law in 2014 called Achieving a Better Life Experience (ABLE) that allows states to create special bank accounts for individuals with disabilities. The funds in an ABLE account don’t count as assets for the purpose of SSI disability benefits (up to $100,000) or Medicaid (states typically use the same limit for Medicaid as they do for their 529 college savings plans).

Anyone is allowed to contribute to an ABLE account, but only $15,000 from all sources is allowed to be put into an ABLE account per year (in 2018). Deposits are not federally tax-deductible, but some states offer deductions. Any income earned from investments in the account is not subject to income tax.

The owner of the account (the disabled person) is able to spend the money directly on “qualified disability-related expenses (QDE),” including housing, health care, education, and basic living expenses. A parent can be given signature authority over a minor’s account.

To qualify to use an ABLE account, an individual must have a disabling condition that began before age 26. This requirement can be met by being entitled to disability benefits through SSI (Supplemental Security Income) or SSDI (Social Security Disability Insurance) or by having a written diagnosis from a physician indicating that individual has a physical or mental impairment that:

  • is medically provable
  • results in severe limitations in functioning, and
  • is expected to last at least 12 months or result in death.

When a person with a disability dies, in most states, any funds remaining in an ABLE account may be used to reimburse Medicaid for any services the person received from that program.

ABLE accounts are only available in states that have passed laws to create ABLE accounts. So far only about half of the states have implemented ABLE programs, including New York, Florida, Illinois, Pennsylvania, and Texas. California has created an ABLE program but it is not yet open for enrollment.

If your state doesn’t have an ABLE program, you may be able to open an account in a state that has made its ABLE program available to residents of other states. For information on your state’s ABLE program, see Nolo’s section on state ABLE account programs.