ABLE account
Key takeaway
An ABLE account is an eligible individual's own account under a qualified state program for disability related expenses, with federal tax benefits and benefit protections subject to eligibility, contribution, distribution and resource rules.
Ownership and authority to act
A qualified ABLE program is established and maintained by a state or its agency or instrumentality. The eligible individual owns the account, even when someone else opens or administers it.
The eligible individual may establish the account personally or select someone to establish it. If the individual cannot establish it, the following priority applies to minors and adults alike:
- An agent under a power of attorney
- A conservator or legal guardian
- A spouse
- A parent
- A sibling
- A grandparent
- A representative payee appointed by the Social Security Administration
Family relationship alone does not bypass this order. The program may accept certification under penalties of perjury of the person's authority and the absence of anyone with higher priority.
The beneficiary generally has signature authority. A person who establishes the account under the selection or inability provisions has signature authority instead.
A signatory other than the beneficiary must administer the account for the beneficiary's benefit and cannot acquire a beneficial interest during the beneficiary's lifetime. The beneficiary may remove and replace a signatory at any time.
Contributions and account limits
The base annual contribution limit is $20,000 across all contributors, plus a qualifying employed beneficiary's permitted additional contribution. State aggregate safeguards also apply.
The additional contribution is limited to the lesser of compensation includible in gross income or the preceding calendar year's poverty line for a one person household.
That increment requires no contribution for the taxable year to a qualified defined contribution plan meeting section 401(a) or 403(a), a section 403(b) annuity, or an eligible section 457(b) deferred compensation plan.
The beneficiary or someone acting for the beneficiary must maintain adequate records and ensure compliance with the additional contribution requirements.
Statutory exceptions to the annual ceiling cover ABLE rollovers and beneficiary changes meeting the conditions below, and qualified section 530A(d)(4)(B) rollover contributions.
The ABLE rollover exclusion requires payment into another ABLE account within 60 days for the same beneficiary or an eligible sibling.
It is unavailable for a transfer within 12 months of a previous transfer to an ABLE program for that beneficiary.
Qualifying siblings are brothers, sisters, stepbrothers and stepsisters, including half siblings. Parents, children and cousins do not qualify for this ABLE transfer rule.
A beneficiary change avoids treatment as a distribution only when the new beneficiary is a qualifying sibling and an eligible individual for that taxable year. A beneficiary change is distinct from a cash contribution.
Contributions generally must be cash. Exceptions cover transfers between programs and beneficiary changes to an eligible qualifying family member.
A beneficiary generally has one ABLE account at a time, with subaccounts collectively treated as one account.
Additional account exceptions cover rollovers, transfers between programs, and corrective returns or transfers of all amounts to the preexisting account with excess contributions returned.
The program requires verification under penalties of perjury concerning an existing account. For a rollover, the transferring account must close by the 60th day after distribution.
Expenses the account can cover
Qualified disability expenses must relate to the beneficiary's blindness or disability and benefit that beneficiary in maintaining or improving health, independence or quality of life.
They can include basic living expenses. Medical necessity or exclusive benefit to a person with a disability is not required, but the disability relationship and beneficiary benefit requirements still apply.
Expense categories include education, housing, transportation, employment training and support, assistive technology, personal support, health, prevention and wellness, financial management, administration, legal services, oversight, and funeral or burial expenses.
SSI resource protection and spending timing
Social Security Administration guidance excludes up to and including $100,000 of an ABLE balance from the beneficiary's SSI resources. The portion above that amount counts as a resource.
SSI payments are suspended when excess resources attributable to the ABLE account cause ineligibility. Medicaid continuation applies when the individual would receive SSI but for that suspension.
Under that guidance, a housing or nonqualified distribution retained into the following month counts as a resource. Spending it during the month received has no effect on eligibility under that rule.
A retained distribution for a qualified expense other than housing remains excluded only while it is unspent, identifiable and intended for that use, and the beneficiary continues maintaining, contributing to or receiving distributions from the account.
Two related terms
Third party special needs trust: A trust funded with property belonging to someone other than the beneficiary or the beneficiary's spouse. Its name alone does not establish benefit exclusion.
First party special needs trust: A trust containing the disabled individual's own assets. Meeting the statutory trust exception still requires a separate review under ordinary SSI resource rules.
Resources to open next
- Special needs and elder law
Open this guide to place the ABLE account within your family's broader discussion of trusts, care planning and benefit records.
- Disability, family wealth and elder care checklist
Use this checklist to gather benefit decisions, disability evidence and care records before discussing contributions or withdrawals with your advisers.
- Incapacity and health directives
Read this guide when deciding which authority documents to bring to a discussion about someone helping the beneficiary manage the account.
- Asset and authority map template
Use the template to record the ABLE account alongside other family assets and identify the people involved in managing each one.
Start with the person's circumstances
This investment perspective offers a useful starting point for a family discussion: bring the person's benefit records, expected expenses and account information together.
"So knowing a good snapshot of that investor's current profile will help marry your investment to what's most beneficial to them."
Common questions
When must the condition causing blindness or disability have begun?
Before age 46, with eligibility also requiring the statutory benefits entitlement or disability certification route during the taxable year. This is an onset condition, so the account can be opened later.
The benefits route requires entitlement based on blindness or disability under title II or XVI of the Social Security Act.
The certification route requires statutory blindness or a medically determinable physical or mental impairment causing marked and severe functional limitations. The impairment must be expected to result in death or last continuously for at least 12 months.
Certification also requires onset before age 46 and a diagnosis signed by a physician meeting the statutory criteria. ABLE certification does not itself establish eligibility for Social Security, SSI or Medicaid.
When does the gross income exclusion for an ABLE distribution apply?
When total distributions to or for the beneficiary during the taxable year do not exceed qualified disability expenses paid during that year, none of those distributions is included in gross income.
Qualified expenses paid by the 60th day after the taxable year ends may be assigned to the preceding year. An expense assigned that way cannot also count in its actual payment year.
If distributions exceed qualified expenses, taxation is based on the earnings portion, reduced in proportion to the qualified expenses. An additional 10% tax applies to the includible amount, with exceptions for death and timely corrective distributions.
Does depositing wages into an ABLE account keep them from counting as SSI income?
No. Depositing the beneficiary's own income into an ABLE account does not change its treatment under ordinary SSI income rules.
Does losing eligibility automatically close the account?
No. The account is not automatically terminated or treated as distributed, but additional contributions cannot be accepted beginning with the first day of the first taxable year for which the beneficiary is ineligible.
Continuing eligibility generally requires an annual determination unless the program adopts another method, such as certifications or different recertification frequencies for different impairments.
Eligible individual status continues through the taxable year in which a disqualifying change occurs. However, expenses incurred while the beneficiary is neither disabled nor blind under the applicable standard are not qualified expenses.
If eligibility returns, contributions may resume within applicable limits and expenses incurred thereafter may qualify.
Can a state claim money after the beneficiary dies?
Yes, if the state files a claim, subject to outstanding qualified disability expenses and applicable state law. The claim is capped by Medicaid assistance paid after account establishment, net of specified Medicaid Buy In premiums.
For the same beneficiary, a rollover or transfer can carry forward an earlier account establishment date. That date cannot precede when the individual became beneficiary of the source account.
State law may prohibit such claims without disqualifying the program. After the applicable Medicaid claim limitations period expires, the program may distribute the balance to a successor beneficiary or, absent one, the estate.
Sources
The linked authorities address account eligibility, contributions, distributions and benefit treatment.
- 26 U.S.C. §529A: qualified programs, ownership, eligibility, contribution limits, expenses and state claims.
- 26 C.F.R. §1.529A-2: establishment authority, signature authority, continuing eligibility, account limits and administration. Its older onset age and contribution language must be read with the amended statute.
- 26 U.S.C. §152: sibling relationships used by the ABLE family definition.
- 26 C.F.R. §1.529A-3: distribution taxation and the qualified expense payment carryback.
- SSA POMS SI 01130.740: administrative guidance on ABLE accounts, SSI income and resource treatment.
- IRS ABLE contribution-limit guidance: the base annual contribution amount.
- SSA POMS SI 01120.200: trust funding sources and SSI resource analysis.
- 42 U.S.C. §1396p(d)(4)(A) and SSA POMS SI 01120.203: the special needs trust exception and separate ordinary resource review.