The ABLE Act and Tax-Free Savings Accounts

The Achieving a Better Life Experience (ABLE) Act allows a tax-free savings account to be created for a disabled child without risking eligibility for other public assistance. The aim of the ABLE Act is to remove bureaucratic obstacles to allow families to save money to help pay for long-term care for a disabled child.

Fixing A Problem For Parents With Disabled Children

Prior to the ABLE Act a child diagnosed with a disability could not have assets over $2,000 or earn more than $680 per month without forfeiting their eligibility for government programs such as SSI and Medicaid. The ABLE Act allows a tax-free account to accrue up to $100,000 in total. The maximum annual limit is based upon the current gift-tax limitation of $14,000 per year.  The money in the account will be able to pay for most disability-related expenses. An ABLE account can be set up by a family member, friend, or the disabled person and all these parties can be contributors to the account as well.

Individual Eligibility

An individual beneficiary is eligible to have an ABLE account if they become disabled before turning twenty-six, and:

1. receives Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI); OR
2. meets Social Security’s definition and criteria regarding significant functional limitations and receives a letter of certification from a licensed physician.

There is a limit of one ABLE account per person set-up in the state in which he/she resides. A disabled individual could be older than twenty-six but must have the documentation to prove he/she was disabled prior to twenty-six.

Allowable Uses for ABLE Accounts

The funds deposited into the ABLE account could be used to cover most expenses for the disabled child such as: Education, Healthcare, Transportation, Housing, Employment Training, Assistive Technology, and any other expenses approved by the Secretary of the Treasury under the regulations. Any interest earned on the savings within the account would be tax-free as well.

Limitations on ABLE Accounts

Only the first $100,000 in an ABLE account would be ignored for SSI purposes. If the ABLE account was to exceed $100,000 SSI would only be suspended and not terminated. The beneficiary would still be eligible for Medicaid. There is the possibility of future state regulation of ABLE accounts similar to how College Savings Accounts are currently regulated. Upon the death of the beneficiary, any money left in the ABLE account could be partially recouped by Medicaid.

About Citizens Disability, LLC:

Since 2010, Citizens Disability has been America’s premier Social Security Disability institution. Our mission is to give a voice to the millions of Americans who are disabled and unable to work, helping them receive the Social Security Disability benefits to which they may be entitled.

Citizens Disability is committed to helping keep people safe from fraud. We will never ask for personal details to start an SSDI application over Facebook or social media. We will only ask for certain details, in private messages, to confirm the identity of a client in a customer service situation. The only way to begin an SSDI application with us is on the phone, through a number found on our website, or one of our clearly-marked advertisements. Please keep your personal details safe, don't share them in a public forum, or with individuals who solicit your information.