ABLE Accounts

ABLE accounts were authorized by the Achieving a Better Life Experience Act and can be an excellent resource for individuals with disabilities.   

Who can an ABLE account be opened for? 

ABLE accounts can be opened for individuals who were diagnosed with a disability that began before age twenty-six. Such an individual is termed the designated beneficiary of the ABLE account.  The designated beneficiary can be of any age when the account is opened, but the disability had to have onset before age twenty-six. The designated beneficiary must meet the Social Security Administration’s definition of disability. If the individual started receiving Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) prior to age twenty-six, the fact that that individual receives SSI or SSDI serves as proof of disability for purposes of opening an ABLE account.  If the individual isn’t receiving SSI or SSDI, then disability can be shown by disability certification. For Missouri ABLE accounts, disability certification involves agreeing that the individual has a written, signed diagnosed from a licensed physician and that the individual is either blind or has an impairment that results in “marked and severe functional limitations.” 

Who can contribute to an ABLE account?  

Anyone can contribute to an ABLE account.  The designated beneficiary can contribute to the account, as can their family or friends.  

How much can one contribute to an ABLE account?  

There are limits on how much can be contributed to an ABLE account in one year. In 2022, the annual contribution limit is $16,000. However, if the designated beneficiary is employed and does not participate in an employer-sponsored retirement plan, he or she may be able to contribute a certain amount in addition to the $16,000.

What are the advantages of an ABLE account? 

One great advantage of an ABLE account is that it can be a way to save money for a person with a disability who receives needs-based public benefits. Many government benefits programs have strict asset limitations. If the individual has more than the asset limit amount, that person would not qualify for benefits. However, through an ABLE account, the individual can have extra funds set aside for qualified disability expenses without jeopardizing eligibility for needs-based government benefits. For example, a person with a disability may be eligible for Supplemental Security Income (SSI) through the Social Security Administration, but a single adult can only have $2,000 in assets in order to maintain eligibility for SSI. However, the first $100,000 in ABLE account funds is exempt when qualifying for SSI. Also, the funds in an ABLE account will largely not impact eligibility for Medicaid, HUD, or SNAP programs. 

ABLE accounts will also allow those with disabilities and their families to save money in a tax beneficial way.  Contributions to an ABLE account are made with post-tax earnings, but withdrawals and investment income earned will not be subject to federal income tax as long as they are used for qualified disability expenses. 

What can ABLE account funds be spent on? 

Distributions from the account are tax-free if used for a qualified disability expense. A qualified disability expense is one related to the designated beneficiary’s disability and which helps maintain or improve his or her health, independence, and/or quality of life. Qualified disability expenses can include expenses related to food, clothing, housing, transportation, education, employment training, assistive technology, personal support services, health care services, and financial and administrative services. 

Conclusion 

ABLE accounts can be an excellent resource for individuals who are disabled, and a great way for their families and friends to be able to contribute in a meaningful way.  Many advocates can arm themselves with the knowledge about what ABLE accounts are and how they are beneficial to their loved ones.