ABLE Accounts: Easing Financial Burdens and Uncertainty for Individuals with Disabilities
Estate planning can be daunting. It is hard think about your mortality and what will happen to loved ones should you pass unexpectedly. This becomes even more difficult if you have a family member with a disability who requires additional financial support and care. Fortunately, there is a special program that addresses this concern.
An ABLE account, also known as a 529(A) account, is a savings program for individuals who have diagnosed disabilities. You can save money for a disabled person’s benefit to use later. Money saved in an ABLE account won’t negatively impact their eligibility for other federal benefits. The biggest limitation on these funds is that they can only be spent for certain expenses.
The Achieving a Better Life Experience Act was passed in 2014. Forty-six states, including Massachusetts, have ABLE programs. In Massachusetts, it is referred to as the Attainable Savings Plan. Each state has its own investment management company, so investment options and fees will vary. You typically do not need to be a resident of the state in which you open an account.
How Do You Qualify for an ABLE Account?
In order to qualify for an ABLE account, you must (1) satisfy the age threshold and (2) have a qualifying disability.
To meet the age threshold: Your disability must have occurred before age 26 in order to qualify for an ABLE account. Beginning in January 1, 2026, the age of eligibility increases to age 45.
To meet the disability criteria: You qualify receive income through one of the following federal programs: Social Security Disability Insurance, Childhood Disability Benefits, Supplemental Security Income, or Disabled Widow/Widowers Benefits. If you don’t already benefit from these programs, you can submit a Disability Certification that’s completed by a health care provider. The certification states that disability diagnosis and that such impairment occurred before age 26. (From 2026 forward, the the impairment has to occur before age 45)
How Can ABLE Account Funds be Spent?
Money saved in an ABLE account must be used for the beneficiary’s basic living expenses. This covers a wide range of costs, including lodging, transportation, health, housing, legal fees, education, financial investment fees, as well as burial and funeral expenses. As long as the money is used for these types of qualified expenses, the gains are not taxable.
What Are the Benefits of an ABLE Account?
One key benefit of an ABLE account is that money saved in these accounts don’t limit a person’s ability to qualify for federal disability benefits. Note however, that there is a $100,000 balance limit to remain eligible for Social Security Income benefits.
The money saved can be invested and the gains on the investments are not taxable as long as the money is spent on qualified expenses.
You can only have one ABLE account, but you can still have a Special Needs Trust. ABLE accounts are generally easier and less expensive to create than a Special Needs Trust. There are also often fewer restrictions on the use of the funds.
Schedule a Consultation Today
You don’t need to work with an attorney to set up an ABLE account. But if you would like to review or start your estate planning, Click here to schedule a consultation with Rebecca G. Neale.
