The
Achieving a Better Life Experience (ABLE) Act, signed into law in 2014, created
a powerful savings tool for individuals with disabilities. ABLE accounts allow
people with disabilities to save money without losing access to essential
government benefits like SSI and Medicaid. Whether for daily expenses or future
needs, these accounts can play a crucial role in achieving financial
independence. In this blog I’ll explain what ABLE accounts are, how they work,
and why they matter.

What is
an ABLE Account and Why do You need it?

An ABLE
account is a tax-advantaged savings account designed specifically for
individuals with disabilities and their families. Many individuals with
disabilities rely on public benefits such as SSI (Social Security Income) and Medicaid
to meet their basic needs. These programs, however, impose strict asset
limits—typically no more than $2,000 in savings—which forces individuals to
stay impoverished to retain their benefits. An ABLE allows you to save and
invest money that can be used for disability-related expenses without affecting
eligibility for critical means-tested benefits like SSI, Medicaid, and other
federal programs.

Example: Jane, a 25-year-old with cerebral
palsy, relies on SSI. She recently received a $5,000
gift from her grandmother. Without an ABLE account, Jane would lose her
SSI benefits because her total assets exceed $2,000. By placing this money
in an ABLE account, Jane can save the funds without affecting her eligibility
for SSI.

Who is
Eligible to Open an ABLE Account?

To qualify
for an ABLE account, it depends on when the disability began. To open an ABLE
account, one must confirm under oath that their disability began before age 26,
or provide proof of eligibility for SSI or SSDI before turning 26. Starting
January 1, 2026, the age limit will be raised to 46, allowing those with
disabilities that began before age 46 to qualify.

What
Can ABLE Account Funds Be Used For?

Funds in
an ABLE account must be used for “Qualified Disability Expenses” (QDEs). These
expenses are broad and can include anything that enhances or maintains the
health, independence, or quality of life of the person with a disability.

Qualified
expenses include but are not limited to education, housing, transportation,
health and wellness, assistive technology, legal fees, and funeral and burial expenses.
If money is withdrawn and used for something that is not disability-related, then
the earnings on the amount withdrawn are treated as income for tax purposes and
the earnings are subject to 10% penalty.

How
Much May be Contributed to an ABLE Account?

In
Massachusetts, the ABLE program allows qualified individuals to save up to
$18,000 annually without affecting their access to means-tested programs. An
employed ABLE account owner who doesn’t participate in an employer-sponsored retirement
plan can contribute an additional amount up to the lesser of a.) their compensation
for the tax year, or b) an amount equal to the poverty level for one person
household for the preceding year ($15,060 for 2024). The account can grow to
$100,000 without impacting SSI and up to $500,000 without affecting Medicaid.

 What
Happens to the Funds After the Beneficiary’s Death?

One of the
most important aspects of ABLE accounts is the Medicaid payback provision. Upon
the beneficiary’s death, any remaining funds in the ABLE account may be used by
the state to reimburse Medicaid for services provided to the beneficiary since
the account was opened.

Example: If John, who had an ABLE account,
passed away with $20,000 remaining in his account, the state could claim some
or all of those funds to cover Medicaid expenses incurred during his lifetime.
If John did not use Medicaid services, the payback rule does not apply, and the
funds could pass to his designated beneficiaries.

Can
Social Security or SSI Benefits Be Deposited into an ABLE Account?

Yes,
Social Security and SSI benefits can be deposited into an ABLE account.
However, it’s essential for a representative payee managing the funds to ensure
that withdrawals comply with ABLE account rules and qualified expenses.

Why
ABLE Accounts Matter

ABLE
accounts provide a pathway to financial security for individuals with
disabilities, offering a chance to save for the future without risking
essential public support. They are an excellent complement to other planning
tools, such as special needs trusts, providing a flexible and accessible way to
manage funds for disability-related expenses.

Planning
Tip: Families
considering ABLE accounts should be mindful of contribution limits and
potential Medicaid payback provisions. ABLE accounts should be viewed as part
of a broader strategy to improve the quality of life for individuals with
disabilities, alongside other estate planning tools.

ABLE
accounts are more than just savings tools—they represent a critical step
towards financial independence and empowerment for individuals with
disabilities. By allowing beneficiaries to save and invest without jeopardizing
essential government benefits, ABLE accounts open doors to greater financial
freedom and a better quality of life. Whether you’re a person with a disability
or a family member planning for a loved one’s future, understanding how to use
an ABLE account can help you navigate the complex landscape of
disability-related finances with confidence and peace of mind.

Do you have more questions or need to chat with me? Visit my website –

https://myspeciallegalplanning.com/