Navigating the financial landscape can be particularly challenging for individuals with disabilities. The introduction of ABLE accounts (Achieving a Better Life Experience) has been a game-changer, empowering them and their families to save for disability-related expenses without compromising their eligibility for vital public benefits.
This blog explores the essentials of ABLE accounts and how they can be a powerful tool for financial independence.
What is an ABLE Account?
An ABLE account is a tax-advantaged savings account established through the ABLE Act of 2014. Designed for individuals with disabilities, these accounts allow beneficiaries to accumulate savings without the earnings being taxed. Contributions are made using post-taxed dollars and, while not deductible at the federal level, may be eligible for state tax deductions.
The Importance of ABLE Accounts
Many individuals with disabilities rely on public benefits like Medicaid, SSI, and SNAP, which have stringent asset limits. ABLE accounts address the financial challenges these individuals face, acknowledging the additional costs associated with living with a disability. These accounts enable savings for critical needs without affecting eligibility for means-tested benefits.
Eligibility for ABLE Accounts
Initially, ABLE account eligibility was restricted to individuals whose disability onset occurred before age 26. However, the ABLE Age Adjustment Act, set to take effect in 2026, extends this age to 46, significantly broadening the potential beneficiaries, including veterans.
Contribution Guidelines
The total annual contributions to an ABLE account are capped, aligning with the federal gift tax exclusion limits. Notably, employed ABLE account owners who aren’t covered by an employer-sponsored retirement plan can make additional contributions.
However, SSI recipients must be mindful of the $100,000 limit, beyond which SSI benefits could be suspended (though Medicaid remains unaffected).
Qualified Expenses
ABLE accounts can finance a broad spectrum of disability-related expenses, including education, housing, transportation, and healthcare needs. These accounts provide a flexible avenue for managing the financial demands that come with disabilities.
Limitation to One Account
Each eligible individual is limited to one ABLE account, ensuring a focused and streamlined approach to saving and managing disability-related expenses.
Cross-State Enrollment
Beneficiaries aren’t confined to enrolling in ABLE programs in their home state. This flexibility allows individuals to choose a program based on their specific needs and the advantages offered by different states’ programs.
Investment Options
Similar to 529 plans, ABLE accounts offer various investment strategies. Beneficiaries can tailor their investment approach based on anticipated needs, projected costs, and personal risk tolerance, providing a customized savings plan.
ABLE vs. Trusts
A supplemental needs trust is another legal device that can be utilized to provide resources for a loved one with a disability without impacting benefit eligibility. An ABLE account can be used in conjunction with a trust, and we can explain the details and make recommendations.
Empowering Financial Independence
ABLE accounts represent a significant stride toward financial empowerment for individuals with disabilities. These accounts offer a pragmatic solution for saving and investing without the fear of losing essential public benefits.
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Since you are on this website, you must be interested in learning more about estate planning. We invite you to explore the site and take advantage of all the written resources that we have made available.
Plus, if you want to take your knowledge to another level in an efficient way, attend one of our seminars. There is no admission charge, and you will walk away with a lot of useful information if you join us. This will also give you an opportunity to connect with our firm for the first time.
To see the dates and obtain more information, visit our Estate Planning Seminars Page.
Need Help Now?
If you’re ready to take direct action to set up a consultation at our Westport or Glastonbury CT estate planning offices, call us at 860-548-1000. There is also a contact form on this site that you can use if you would rather send us a message.
Mr. Nirenstein is licensed to practice before the courts of the State of Connecticut and the United States District Court. He is a member of the Connecticut and Hartford County Bar Associations, and the Estate and Probate, Elder Law, Business Law and Real Estate Sections of the Connecticut Bar Association.