ABLE Accounts

ABLE Accounts are tax-advantaged savings accounts for individuals with disabilities and their families. ABLE accounts were created by federal legislation passed in 2014 (“the ABLE Act”), which recognized the fact that millions of individuals with disabilities rely on public assistance such as SSI and Medicaid for their living expenses, housing, and health care. Eligibility for these public benefits has a strict means test — no more than $2,000 in savings and other assets. Recognizing that the living costs for disabled individuals are often significantly higher than normal, the ABLE Act provides that special ABLE savings accounts can be established by the individuals and their families without jeopardizing eligibility for public assistance. 

The ABLE Act limits eligibility to individuals whose disability had its onset before reaching 26 years of age. Annual total contributions made on behalf of any individual are limited to $14,000 at present. 

ABLE accounts are to be administered by the individual’s state of residence, but many states, including Texas, do not yet have their ABLE programs up and running. Accordingly, the Act was amended in 2015 to provide that otherwise eligible individuals may enroll in any other state’s ABLE program if that program accepts out-of-state residents. 

ABLE accounts will provide more choice and control than a Special Needs Trust, and will likely be less expensive to establish and maintain. For families with more significant assets, an ABLE account will be a valuable addition and supplement to a Special Needs Trust, rather than a replacement. 

JL

This blog is for informational purposes only.  

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