What is an ABLE account?

For many special needs families managing the amount of money in a loved one’s bank account is a constant stress.  Typically the Social Security Administration imposes an asset cap of $2,000 on persons receiving SSI and Medicaid. While this number can fluctuate somewhat based on specific programs, it’s an issue that special needs families always have to pay attention to.

Fortunately there are a number of tools that help families deal with this issue. Special Needs Trusts are a great tool to help with long term planning.  However, another wonderful tool that every special needs family should know about is an ABLE Account.

An ABLE Account is essentially a savings account for persons with disabilities. Generally speaking two elements are required for eligibility. First a person has to be disabled.  If the special needs individual is already receiving SSI or Social Security Disability then they are automatically considered disabled. Persons who are blind are also considered disabled.  If neither one of these criteria are met, a special needs individual can ask a doctor to certify their disability in writing.

The second element of eligibility relates to age. In order to be eligible for an ABLE Account the disability must have an “age of onset” prior to 26.  Note that persons can open an ABLE Account even late in life. The rules only state that the disability had to “onset” before the person’s 26th birthday.

An ABLE Account can hold up to $100,000 without impacting SSI eligibility. This is a simple, effective, and efficient way for a disabled person to 1) save money, 2) receive SSI and Medicaid, and 3) stay clear of the $2,000 cap that causes so many problems. Typically, ABLE Accounts can hold funds in cash (essentially a checking account), in investments, or a combination of both.  Many ABLE programs even come with a debit style card making the funds readily accessible.

ABLE Accounts have other advantages. Contributions to an ABLE Account are tax deductible. And earnings within the account are not subject to income tax.  

As with anything in life there are some restrictions. Expenditures are limited to “disability related expenses”. Additionally, annual contributions are generally limited to approximately $16,000.  

ABLE Accounts are a great tool that every special needs family needs to know about. The $2,000 cap is a very real problem for many families. Some deal with the issue in “alternative” ways.  An ABLE Account is a secure and legal way to save money and have it readily accessible when needed. If you would like to see whether an ABLE Account is a good fit for your family just give us a call at (501) 566-8087 to schedule an appointment.  

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