ABLE Accounts

An Achieving a Better Life Experience (ABLE) account lets people with disabilities save some money without affecting their benefits. It also allows family and friends to give them money to use for various expenses.

If you have a disability that began before you turned 26 and meets Social Security Administration standards, you can open an ABLE account. (SSA has different standards for children, for adults, and for blindness.) An ABLE account can help you:

  • Build assets in an account that has federal tax advantages. Your investments in an ABLE account won’t be taxed, so your wealth will grow faster. Plus, If you work and save earned income in your ABLE account, you may qualify for the federal Saver’s Credit.
  • Use your savings on many types of expenses. There are rules about spending the money in your ABLE account, but there’s also a lot of flexibility.
  • Save up money without losing benefits. Many benefits programs have resource limits, but:

The bottom line: An ABLE account means that you can save up money without losing your benefits. It also lets family and friends give you money without affecting your benefits.

ABLE account rules are introduced below and covered in detail in DB101's ABLE Accounts article.

Does your disability qualify?

You definitely qualify for an ABLE account if your disability began before you turned 26 and you get benefits like Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI), Childhood Disability Benefits (CDB), or Medicaid (based on your disability), because they all use SSA's disability standards. If you don’t get disability-based benefits, you may be able to “self-certify” that your disability meets SSA’s standards. (SSA has different standards for children, for adults, and for blindness.)

Opening an ABLE Account

An ABLE account is easy to set up, and you don't need a lawyer or other advisor. You can open your own ABLE account or, if needed, it can be opened for you by a parent, a legal guardian, or someone with a valid power of attorney.

Some states offer ABLE accounts and others don’t. Kentucky's ABLE account program is STABLE Kentucky, which is only open to Kentucky residents.

If you qualify for an ABLE account, you can open one in any state that offers a nationwide program. Although you can only have one ABLE account at a time, you can switch your ABLE account from one state program to another. Compare the ABLE account options in different states.

Rules about ABLE Account Money

There are two limits on how much money can be deposited in an ABLE account in a single calendar year:

  • Up to $15,000 in total deposits can come from any source (you, your family and friends, your benefits, and other unearned income), plus
  • If you have a job, another $12,760 in deposits can come from your own earned income.

Important: You need to keep good records, to make sure that too much money isn’t put into your account.

State ABLE programs also have limits on the total amount in your account — typically $200,000 to $500,000, depending on the state. For example, if the cap is $300,000, you cannot make a deposit until your account balance drops below $300,000 again.

The money in an ABLE account has to be used for certain qualifying expenses, like daily living expenses, education, or housing. Many expenses qualify. It's your job to make sure an expense qualifies, and to keep records of how you use your ABLE account money.

If you take money out of an ABLE account but do not use it for qualified disability expenses, you might have to pay income tax on it plus a 10% penalty, and it could affect SSI and other benefits

Learn more in DB101's article about ABLE accounts.

ABLE accounts and Special Needs Trusts
An ABLE account:
  • Is easier (and cheaper) to open and manage than a trust
  • Provides tax benefits (as long as any money withdrawn is spent on qualified disability expenses)
  • Gives you more control and more choices
  • Lets you use the money for housing expenses without making SSI benefits go down

A Special Needs Trust:

  • Has no limits on contributions
  • Does not require that your disability began before you turned 26
  • Any money left in the trust when you die does not have to be used to repay Medicaid, if the trust was set up by someone other than you (a Third Party Trust), with their money
  • The money in a Special Needs Trust does not have to be spent on qualified disability expenses

The bottom line: Because there are limits on how much you can put into your ABLE account each year, you cannot replace a trust with an ABLE account. Instead, use them both as part of your overall asset-building strategy.

If you have an ABLE account and work:
  • You can put up to an extra $12,760 of your earnings into your account (on top of the regular $15,000 that is allowed). The $12,760 must be from your own earnings – it cannot be contributions from others or money you get from benefits or other unearned income.
    • Note: This means that if you earn $12,760 or more, you could have a total of up to $27,760 go into your ABLE account in a year. If you earn less than $12,760, the amount you could contribute would be lower.
  • You may qualify for the Saver’s Credit when you file your federal taxes.
  • You have to make sure that too much money isn’t contributed into your account (even if it is other people making the deposits). Check with your ABLE program if you have questions about this.