Table of Contents

  1. ABLE Account FACT SHEET
  2. An ABLE Account, a Special Needs Trust (SNT) or Both?
  3. Retirement Accounts, Special Needs Trusts and the ABLE Account 
  4. ABLE Account Investment Choices
  5. Case Studies Utilizing the ABLE:
    • Protecting Social Security Eligibility
    • ABLE to Save and Have Control of Your Own Money
    • Representative Payees Managing Income and Social Security Benefits
    • Grandparents Gifting to an ABLE
    • ABLE and Wages, 529 Fund Rollovers & Saver's Credit
    • Financial Aid Facts for Families of People with Disabilities
  6. The ABLE Account and Special Needs Planning in the Press
  7. DOWNLOAD our E-book, The ABLE Account and Special Needs Planning





Begin with the basics: 

ABLE Basics

  • ABLE or 529A Accounts are tax-advantaged savings accounts for individuals with disabilities.
  • Eligible individuals and their families will be allowed to establish ABLE savings accounts that will not affect the individual’s eligibility for SSI, Medicaid and other means-tested public benefits.
  • The beneficiary of the account is the account owner.
  • An individual may only have one ABLE account.
  • Contributions to an ABLE account:
    • may be made by any person (the account beneficiary, family and friends).
    • are made using post-taxed dollars.
    • are not tax deductible, although some states may allow for state income tax deductions for contributions made to an ABLE account.

ABLE Eligibility

  • Accounts can be established by or on behalf of a person with a disability, provided that the beneficiary's disability began before age 26.  Legislation is pending to amend the eligibility age of onset to age 46.  This would allow people with later diagnosed mental health concerns or later onset disabilities to participate. 
  • If the person with a disability meets this age criteria and receives SSI and/or SSDI, they are automatically eligible to establish an ABLE account.
  • If the person with a disability does not receive SSI and/or SSDI, but meets the age of onset requirement, they may be eligible if they meet Social Security’s limitations criteria and receive a letter of certification from a licensed physician.
  • The account owner may be any age but again, the age of onset of disability must have occurred before their 26th birthday.

Benefits of the ABLE account

  • Protecting eligibility for means-tested government benefits such as SSI, Medicaid and SNAP.  Protecting eligibility for these public benefits (SSI, SNAP, Medicaid) requires meeting a means or resource test; the recipient may not have more than $2,000 in their name.
  • Money in an ABLE account grows tax- free. Income earned in ABLE accounts will not be taxed provided the funds, when withdrawn, are used for qualified expenses.
  • Tax-free withdrawals can be made for "qualified disability expenses". For the first time in public policy, the ABLE Act recognizes the extra and significant costs of living with a disability.
  • There may be additional benefits such as the Saver's Credit, earned income credit or State tax credit for the donor and /or owner. 

Qualified Disability Expenses (QDEs)

  • A "qualified disability expense" means any expense related to the designated beneficiary as a result of living a life with disabilities.
  • In many states, a pre-paid debit card is available with an ABLE account. The ease of use may allow some account owners an expanded role in managing their finances.
  • Qualified Disability expenses may include: education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services and other expenses, which help improve health, independence, and/or quality of life.

ABLE Account Contributions & Limits

  • The total annual contributions by all participating individuals, including family and friends, for a single tax year is $16,000. Under current tax law, $15,000 is also the maximum amount that individuals can make as a gift to someone else and not report the gift to the IRS (2022 gift tax exclusion).
  • The total contributions that can be made to an ABLE account is subject to each individual state's 529 savings account limits. Many states have set this limit at more than $300,000 per account. 
  • Funds may be rolled over from a 529 account to a 529A account for a beneficiary or family members as part of the $16,0000/year limit on contributions.
  • In addition to the annual contribution limit of $16,000, an ABLE account owner who works and does not participate in an employer sponsored retirement plan may also contribute his or her compensation up to the federal poverty level (FPL) amount for a one-person household.  The FPL amount applicable is $12,880 for individuals who live in the continental USA (2021).
  • The first $100,000 in an ABLE account is not counted as an asset for purposes of SSI eligibility. Once an ABLE account balance exceeds $100,000, the beneficiary's SSI payments are suspended until the account balance drops below $100,000. However, the beneficiary remains covered by Medicaid regardless of the account balance.
  • Be aware: The ABLE has a “Medicaid Pay-Back” provision. Any monies remaining in an ABLE account when an owner dies may be subject to a reimbursement claim by Medicaid for expenses from the time the account was open.  Payback provisions may vary from state to state. 
  • You may roll up to $15,000 each year (this amount counts toward your ABLE annual maximum contribution) to the beneficiary's (or qualified family member's) ABLE.

Opening and Investing an ABLE Account

  • Regardless of where you might live and whether or not your state has decided to establish an ABLE program, you are free to enroll in any state’s program provided that it accepts out-of-state residents.  
  • Currently, 42 states and the District of Columbia offer ABLE accounts with 26 states (2020) allowing out-of-state participants. The ABLE National Resource Center offers a Three-State comparison tool that allows you to compare and evaluate the plans of 3 states on the basis of 10 key criteria.  
  • Like 529 college savings plans, states are likely to offer qualified individuals and families multiple options to establish ABLE accounts with varied investment strategies. You will need to align your investment choice with the use and time frame for the funds in the ABLE and your risk tolerance. Your ability to change the investment choices in your ABLE account vary from plan to plan. 

Information from: The ABLE National Resource Center, US News and World Report 

Note that when distributing for non-qualified expenses, the pro-rata portion of the earnings attributable to the non-qualified expenses are subject to tax plus a 10 percent penalty. There is no assurance that the techniques and strategies discussed are suitable for all individuals or will yield positive outcomes. Investing involves risk including loss of principal. Prior to investing in an ABLE account, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits available for investments in such state’s ABLE program. Consult with your tax adviser before investing.




2. An ABLE, A Special Needs Trust or Both? 

apple_pexels-john-finkelstein-1630588It is mid-afternoon and you are a bit hungry. Will you choose to eat an apple and a handful of almonds or a few chocolate chip cookies? 

An ABLE account and a Special Needs Trust (SNT) may both provide money for a person with special needs and protect their eligibility for government benefits, but they are very different options. 

While the choice of how to save for your child’s (or grandchild’s) future is infinitely more important than making the snack decision, the principle is the same. Making the choice that best fits your goals and circumstances will yield the most satisfying outcome.  

I. The ABLE Account

The role of an ABLE account in planning for a person with special needs is as a “wealth accumulation”   vehicle or in simple terms, a way to save money.  

II. A Special Needs Trust (SNT)

SNT (specifically, a 3rd party or supplemental needs trust will be classified as an “estate planning” vehicle for the parent (or grandparent) rather than an optimal account in which to save for their child's future during their lifetime.  

There are circumstances however, when a SNT will be funded during the parents’ lifetime. Read a detailed, side-by-side analysis of the (very different) ABLE Account and SNT here




Another Option: KEEP IT SIMPLE. 

Another option to keep in mind: Depending on a parent’s estate size and planning, keeping it simple and saving for the child directly in the parent’s own name is a choice to be considered.  While this has benefits and drawbacks from a purely financial point of view, it gives the parent complete control of how funds are spent.  

While the choice of a savings vehicle is important, regardless of how you save- in an ABLE account, a trust, in your own name or another vehicle- the important thing is to save money for the lifetime support of your family member with a disability. 






3. Retirement Accounts, Special Needs Trusts and the ABLE Account

Retirement_pexels-mikhail-nilov-6972772Retirement accounts may act as powerful financial and estate planning tools and present a unique opportunity to plan for children with special needs. Each family's planning strategy will differ depending upon their own circumstances and the level of their assets held in retirement vs. non-retirement accounts.

Here are 2 examples illustrating the use of retirement account assets in special needs planning. 

I. A person with disabilities may qualify as an exception to the “10-year Rule”.

The Setting Every Community Up for Retirement Enhancement or SECURE Act - effective January 1, 2020 - made important changes for both retirement account owners and beneficiaries to consider in their financial planning. One major change was the replacement of the "stretch" provision, in which a beneficiary could take distributions from an inherited IRA over the course of their lifetime, with the “10-year rule”. The "10-year rule" states that non-exception beneficiaries are required to take a full distribution of the assets held in an inherited IRA within a 10-year period.  

A person with disabilities may qualify as an exception to the “10-year Rule”.

As an exception to the 10-year rule, qualified individuals with disabilities (see Internal Revenue Code Section 72(m)(7) for definition of disability) retain the ability to take distributions throughout their lifetime.  One simple planning strategy for retirees to consider is having a properly drafted SNT as a beneficiary of their retirement account. The beneficiary may receive distributions from the retirement account. Perhaps these annual RMDs may fund their ABLE account. Any assets remaining after their lifetime will be distributed to individuals in accordance with the trust document.  These heirs will then be subject to the "10- year "rule. For more information about about this strategy, please read When a Special Needs Trust is a Beneficiary of a Retirement Account.  

II. Are you a candidate for a Roth IRA Conversion?  

 If you want to leave retirement assets to your heirs, converting some or all of these assets to a Roth IRA is a strategy to consider.  Ask yourself (or your accountant) the following questions: 

  •  Is my current tax rate lower than my anticipated future tax rate? 
  •  Do I have space in my marginal tax bracket above my current level of taxable income?  
  • Am I OK with paying taxes today to leave a tax-free legacy for my heirs? 

If you answered “yes” to the above questions, it may be time to talk with your tax and estate planning professionals to determine if it makes sense to convert some of your retirement savings to a Roth IRA this year.   

To read more about this strategy and review a case example, take a look at the 10-year Rule and After-Tax Strategies to Consider 




4. Assessing Your ABLE Account Investment Choices 

investment mix_pexels-photomix-company-106344As part of an advisory group implementing the ABLE account in Massachusetts, we learned that many people opening ABLE accounts stopped the application process when they were asked to determine the investment choices for their contributions. This behavior raised a concern that individuals enrolling in the ABLE program might not have adequate prior experience or knowledge of financial matters to confidently make the best selection for their situation.

Depending on when you put funds in, your account may have increased in value or have decreased due to market fluctuations.  For investors with little experience, it may be a shock to observe 90 cents where they had invested a dollar a short time earlier.  Regardless of how much money is in the account, it is critical to invest the funds in the ABLE account to meet the goals of the account owner.

Key Considerations for Your Investment Choices

  1. When determining your asset allocation (the balance between stocks, bonds and money markets), think about your personal ability to withstand a decline in your account balance and your tolerance of market volatility .
  2. Be sure to align your asset allocation with the timing of your goals; the investments in the account should match how the funds in the account are being used.

Depending on the goals for the account, the funds may be invested to provide a mix between funding for transactions in the near term and growth for the future. For example, if a portion of the funds in the ABLE are to be used for transactions, you should consider investing these monies in very low risk assets, such as money market funds.  Asset allocation should be a thoughtful and informed evaluation; federal law allows account owners to change investments in their ABLE account twice per year.  Be sure you are comfortable that the money is invested to meet both your short-term needs and your long-term goals. 

Case Study: Paul's ABLE Account Investment Choices

Paul and all other elements of this example are fictitious and all investment results are hypothetical.

Paul is an ABLE account owner. He works and has contributed about $5,000 of his earnings to his ABLE account over the course of the year. Paul was saving money in his ABLE to buy furniture for his apartment, and his parents decided to contribute $10,000 toward that goal to Paul’s ABLE account. Paul chose a growth portfolio for his ABLE, investing 70% in stocks and 25% in bonds and 5% in money market securities. At the end of the year, the stock market had taken a fall and the $15,000 contributed to the account over the course of the year was worth only $12,000 (return is hypothetical).

While Paul and his parents believe his account will recover the $3,000 loss over time, he has to rethink and/or postpone the furniture purchase he hoped to make in the spring. Since Paul had a near-term use for the funds he invested in his ABLE account, he needed to choose investments that may have offered a lower return but had little to no risk to this principal. He could have chosen the growth portfolio for a portion of the contributions and kept the remainder in another, more conservative fund or money market.

Like Paul, many individuals who have opened ABLE accounts may not be overly experienced with investments and should review and reassess their investment choices based upon the key considerations outlined above.




5. Case Studies Utilizing the ABLE


ABLE & Protecting SSI



ABLE to Save and control your own money


Rep payees managing SSI


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Work, Saver's Credit, 529 rollover



Financial Aid FAQs