Living with a disability can add a wide range of special needs – and significant extra costs – to ensure the same opportunities, freedoms, safety and fulfillment as nondisabled individuals. ABLE accounts can help fund essential needs.
Millions of Americans with disabilities and their families rely on public benefits for income, health care, food and housing assistance to meet those needs. Yet, eligibility has historically required poverty. Benefits cease if the individual has more than $2,000 in resources (including stocks, bonds, bank accounts and property).
In 2014, Congress passed the Achieving a Better Life Experience (ABLE) Act and created the ABLE account. Up to $100,000 in these accounts are exempt from the means-test limit for benefits like Supplemental Security Income (SSI), Medicaid, HUD and other programs. The 2018 CARES Act further expanded ABLE account benefits.
ABLE accounts are available to U.S. citizens and permanent residents whose disability developed before the age of 26. A signed diagnosis from a licensed physician is required. Individuals may also be eligible for SSI or Supplemental Security Disability Income (SSDI) benefits; however, it is not required to qualify for an ABLE account.
Key benefits of ABLE accounts are tax-free withdrawals on qualified expenses and autonomous spending decisions.
Following are additional key points:
- Contributions up to $15,000 per year are allowed.
- Accounts are chartered by the states and administered by banks or investment companies (similar to 529 education accounts).
- They generally have one to eight investment options, and typically very low fees.
- Some states offer deductions for contributions.
- Checks and debit cards are available.
- Families may transfer or roll over funds from a 529 plan to another family member’s ABLE account (this would count toward annual contribution limit).