With so many different assistance options available, there are a lot of opportunities that people don’t know exist. One option that may get overlooked is the Achieving a Better Life Experience (ABLE) Act. One reason that people may not know that this exists is because of how new it is! This act was created in 2014 to help those with disabilities. With the help of this act, qualifying individuals can benefit from a tax-advantaged savings account. These savings accounts are a huge asset to those who have disability expenses!
What are ABLE Accounts?
These ABLE accounts (also referred to as 529 A accounts) are a useful opportunity to save money for eligible individuals. ABLE accounts are saving accounts that can help people with disabilities and their families! A person can save up to $16,000 a year as of 2022 (previously it was $15,000 in 2021). Even though this is the maximum amount that a person can contribute, it actually varies by state. The funds in this type of account can go towards qualifying disability expenses for the account’s beneficiary. Another perk of this account is the fact that anyone can contribute (post-taxed) funds! That means the beneficiary’s friends, families, etc., can put funds in there. The funds in an ABLE account are usually not tax deductible but because these accounts vary by state, there may be some exceptions. Some states may allow state income tax deductions.
Understanding Accounts by State
ABLE accounts are not the same depending on the state! Each state has their own set of guidelines. When these types of accounts were created, there was a rule stating that individuals can only open an account in the state they live in. However, in 2015, this requirement was removed! That means people can compare and choose the state that they want to open up their account in. Comparing your options is super important so you can find an account that works best for your situation. You can easily review the different state options with the ABLE National Resource Center. This resource will be able to show you the different ABLE accounts by state. When you are comparing states you will want to compare the tax benefits, and fees between them.
ABLE Account Fees
It is important to be aware that these accounts may have fees. Generally fees would include maintenance fees. Just as there are fees, some ABLE accounts may have fee waivers for qualifying individuals like residents, those with a specified account balance, etc. We may sound like a broken record but when comparing your ABLE account options, make sure to keep fees in mind!
ABLE Account Eligibility
Not everyone can qualify for an ABLE account. These accounts were created with people who have a disability in mind. An ABLE account’s designated beneficiary must:
- Meet the eligibility requirements for disability certification before they turned 26 years old
- Be eligible for Supplemental Security Income (SSI) due to a blindness or disability before they turned 26 years old
- Be entitled to disability insurance benefits (DIB), childhood disability benefits (CDB), or disabled widow’s/widower’s benefits (DWB) due to a blindness or disability that started before they turned 26 years old
No matter how you qualify, you will need to show proof of eligibility. Each state has their own requirements for what type of documentation you will need to show for your ABLE account. Generally, you can expect to show proof of disability, identifying information, etc.
What if You are Older Than 26 Years Old?
Regardless of your age, you still may be able to qualify for an ABLE account. As long as you meet other qualifying criteria, your current age doesn’t matter.
What Disabilities are Eligible for an ABLE Account?
A good rule of thumb to keep in mind is that if your disability results in many limitations, you will likely qualify for an ABLE account. It doesn’t matter the type of condition whether it be mental, physical, developmental, etc. Some great resources to review qualifying disabilities are the Social Security Administration’s Blue Book (Parts A and B), and SSA’s List of Compassionate Allowances Conditions.
What Counts as Qualifying Disability Expenses?
We said earlier that the funds from an ABLE account can go towards qualifying disability expenses (QDE). Some QDE expenses are:
- Administrative services
- Assistive technology
- Education costs
- Employment training expenses
- Employment support costs
- Financial management expenses
- Health care expenses
- Housing costs
- Other disability-related expenses
- Personal support services
- Transportation expenses
Benefits of an ABLE Account?
ABLE accounts are actually quite beneficial! One of the key benefits of an ABLE account is the fact that the first $100,000 into the account isn’t considered a personal asset. What is defined as a personal asset is important because it can impact eligibility for other programs like Medicaid, Supplemental Security Income (SSI), housing assistance, and more. These programs have limits around what an individual can have as a personal asset! If an ABLE account owner has $63,000 in their ABLE account, they can still be eligible to receive help from other assistance options.
Frequently Asked Questions
ABLE accounts can be a little confusing! Luckily, they don’t have to be. Hopefully some of these frequently asked questions will provide a little bit more context to ABLE accounts! If not, you can visit some of the resources listed in this article and get more context from there.
What is a Designated Beneficiary?
The term “designated beneficiary” isn’t one that most people hear everyday. A designated beneficiary is just the owner of the account. You may see the terms interchangeably when you review information about the different ABLE accounts,
How Many ABLE Accounts Can You Have?
While you have the opportunity to review a variety of different ABLE account plans, you can only have one. You cannot have more than one ABLE account no matter which state you choose to open it in!
What Will Happen to Your ABLE Account When You Pass Away?
While thinking about passing away can be unsettling, it is necessary to help you plan properly! Once an ABLE account owner passes away, the funds in the account can continue to go towards qualifying disability expenses like burial costs, funeral costs, etc. The state that you choose for your ABLE account will have specific guidelines around what it means for an ABLE account once the owner passes away.
How Many Different Types of ABLE Accounts are There?
There are 49 different ABLE account options as of 2022.
Bottom Line
ABLE accounts are a great way for eligible individuals to benefit from other assistance programs while dealing with their qualifying disability. These tax-advantaged savings accounts can help people if they meet one of the following eligibility requirements:
- Meet the eligibility requirements for disability certification before they turned 26 years old
- Be eligible for Supplemental Security Income (SSI) due to a blindness or disability before they turned 26 years old
- Be entitled to disability insurance benefits (DIB), childhood disability benefits (CDB), or disabled widow’s/widower’s benefits (DWB) due to a blindness or disability that started before they turned 26 years old
It’s important to keep in mind that states will have their own version of an ABLE account. You have 49 options to choose from so it is important to compare before you decide!
