ABLE Accounts: A Tool for Disabled Individuals

ABLE accounts can be established for individuals with disabilities in which the onset of the disability occurred before age 26, and can be used to pay for qualifying expenses ranging from housing and living expenses to employment related expenses.  ABLE accounts can provide several significant benefits to individuals receiving Supplemental Security Income (“SSI”) and/or Medicaid (“MA”) benefits, while also providing tax advantaged savings opportunities. 

 An ABLE account benefitting an individual with disabilities in not a countable asset for SSI and MA qualification purposes, and contributions to an ABLE account avoid the reduction of SSI and MA benefits that otherwise might occur when a third party provides benefits to an individual receiving SSI or MA.  There are several ways an ABLE account could be used by an individual with disabilities and their families to avoid interfering with SSI and MA benefits.  An individual with more than $2,000 worth of assets at the end of a given month could funnel excess funds out of a checking account and into their ABLE account.  In addition, designated third parties can contribute to an ABLE account rather than paying for expenses directly.

 It is important to note that there are rules that apply regarding the annual contributions to an ABLE account, which cannot exceed the gift tax annual exclusion amount for the year of the contributions.  In addition, account balances in excess of $100,000 are countable for SSI benefits, and states set the account balance limit for MA benefits.  Further, only certain designated persons can open or contribute to an ABLE account, including the individual with disabilities, a parent of the person with disabilities, a guardian for the person with disabilities, or the agent for any of these persons.  Finally, only one account can exist per qualifying beneficiary.

 If you support an individual with special needs or are an individual with special needs, in which the onset occurred before age 26, you could be taking advantage of an ABLE account to pay for housing, employment, and other qualified expenses without interfering with SSI income or MA benefits.  By including the express powers in your durable power of attorney to make gifts to an ABLE account or to contribute to your own ABLE account, the advantages offered by ABLE accounts will not be lost if you or your special needs loved one becomes incapacitated.