Add an ABLE account to a special needs financial plan
Learn about Achieving a Better Life Experience (ABLE) accounts and why you may want to add one to your special needs financial plan
Your financial plan for special needs is made up of many parts. A Letter of Intent (LOI), government benefits, employee benefits and legal or financial structures — like a Special Needs Trust (SNT) and an ABLE account.
An ABLE account is a qualified, state-established savings account that receives preferred federal tax treatment. It enables people with disabilities to budget, manage spending and save employment income or other funds to pay for disability-related expenses without jeopardizing their public assistance eligibility.
ABLE and SNT
An ABLE account may be easier to access for short-term spending; it allows broader spending power — like for food and housing, all earnings are tax-free, and individuals can manage their own money. Plus, state tax deductions apply, where available.
Special Needs Trusts (SNTs) can hold unlimited assets, and a third-party trust may be used for estate planning and family wealth transfer. Special Needs Trusts even allow distributions to fund an ABLE account, which offers families some unique planning opportunities to use both vehicles together.
ABLE account benefits
If you’re an individual with a disability, the account is owned by you. If you’re a caregiver your loved one with a disability is the owner.
While each eligible individual may have only one ABLE account, a personal representative (guardian, conservator, agent of Power of Attorney or parent) can help manage it, and multiple individuals may make contributions to it.
Contributions to an ABLE account are made with post-tax dollars, so ABLE programs and distributions for qualified disability expenses are generally exempt from federal taxation. With certain exceptions, non-qualified distributions are subject to an additional 10% tax on the account earnings.
Some states provide significant tax incentives for contributions to ABLE accounts. Check your state’s plan to see if it applies to only its own plan or to any ABLE account.
Contributions to ABLE accounts can also now qualify for the “Saver’s tax credit,” which can help you save on federal income taxes.
An ABLE account requires low or no startup costs, and lifetime maximums vary by state. While many are at least $300,000, some states go as high as half a million dollars. You won’t need an attorney or a trust administrator — only a minimal opening deposit, often as low as $50, and some states are even waiving the initial setup fees. Investment costs vary, so check with your ABLE plan for details.
ABLE account eligibility
Up to 4 million children and 8 million adults are estimated to be eligible for ABLE accounts, based on disability status and age of onset.¹
You may be eligible at any age, if your disability occurred before age 26.
Severity of disability²
There are multiple ways to prove eligibility for an ABLE account:
- You meet the disability requirements for Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) benefits (Title XVI or Title II of the Social Security Act).
- You receive a Disability Certification signed by physician, attesting to a diagnosis of a severe and limiting physical or mental impairment or a condition that has lasted or is expected to last for at least one year.
If you meet one of these requirements, you may be eligible for an ABLE account. Talk to a financial advisor today to see if an ABLE account could improve your financial future.
- Download our guide to ABLE accounts (PDF) for more information
- Check out your ABLE account eligibility and state programs
- Open an ABLE account in the name of the person with a disability.
- Save income, inheritances and other funds to spend on qualified expenses.
- Talk to a financial advisor for guidance and strategies for your special needs plan.
- Goodman, N (2015) Estimated Number of ABLE Act Participants. National Disability Institute (Jan. 6, 2015)
- ABLE National Resource Center: About ABLE Accounts