In 2014, Congress passed the Achieving a Better Life Experience (ABLE) Act, which authorizes individuals with special needs to establish ABLE accounts or special savings accounts. Before the ABLE account, these individuals often could only have significant savings by jeopardizing their eligibility for government benefits. The ABLE Act addresses this issue by allowing individuals with special needs to save certain amounts of money each year in ABLE accounts exempt from the asset limits on most government benefits programs.
Understanding ABLE Accounts
Individuals can save up to $100,000 in ABLE accounts without those funds counting against their eligibility for programs such as Medicaid or Supplemental Social Security (SSI). The exemption of the funds in these accounts from resource limits in public benefits programs is critical because asset limits for Medicaid and SSI in many states are set at only $2,000. As a result, before the ABLE Act went into effect, individuals who saved more than $2,000 often were at risk of losing their Medicaid or SSI. On the other hand, an inability to save funds meant they often could not afford additional items or services they needed that government benefits or other programs did not cover.
Another advantage to ABLE accounts is that individuals with disabilities can open up ABLE accounts on their own, unlike most special needs trusts. This feature gives individuals more control over the funds, rather than asking a trustee to disburse the funds according to the terms of a trust.
Eligibility to Open an ABLE Account
Individuals must have a disability within the meaning of the Social Security Act to be eligible to open an ABLE account. They also must have developed their disability before the age of 26. However, beginning in 2026, individuals will become eligible to open ABLE accounts if they become disabled before age 46.
An individual with a disability is limited to having one ABLE account. Regular banks do not maintain ABLE accounts. Instead, each state maintains an ABLE program. Individuals are not limited to opening an ABLE account in their state of residence, but doing so may provide additional state tax advantages in some states. Additionally, some state ABLE programs only permit residents of that state to open accounts.
Making Contributions to ABLE Accounts
Beginning in 2024, individuals with disabilities can contribute up to $18,000 annually to their ABLE accounts, an increase from $17,000 in 2023. Friends and family members can also contribute to individuals’ ABLE accounts. Additionally, through the end of 2025, the ABLE to Work Act permits individuals with disabilities to put their wages into their ABLE accounts, even beyond the $18,000 limit, if they are working and their employer is not contributing to a retirement account. These individuals can contribute an additional amount to their ABLE accounts equal to their gross salary for the current year or the Federal Poverty Level for an individual for the previous calendar year, whichever is less. The Federal Poverty Level for a household of one in the continental U.S. in 2023 was $13,590.
Money in ABLE accounts can be used toward qualified expenses related to individuals’ disabilities that government benefits or other programs don’t cover and that benefit them by improving health, independence, or quality of life. Qualified disability expenses (QDEs) include the following:
- Education;
- Housing;
- Transportation;
- Employment training and support;
- Assistive technology and related services;
- Health;
- Prevention and wellness;
- Financial management and administrative services;
- Legal fees;
- Expenses for ABLE account oversight and monitoring;
- Funeral and burial; and,
- Basic living expenses.
Call Rubin Law Today to See How We Can Help
Rubin Law is the only Illinois law firm to dedicate itself exclusively to providing compassionate legal services for children and adults with special needs. We offer unique legal and future planning techniques to meet your family’s individual needs.
Call us today at 866-TO-RUBIN or email us at email@rubinlaw.com to learn more about the services we can offer you and your family.
