Last week, this section included a question about how to financially assist someone so that the person doesn’t lose federal benefits. I suggested creating a “Special Needs Trust.”
A reader reminded me that people can also use an ABLE Account, which I had overlooked. It’s named for the Achieving a Better Life Experience Act, which became law in 2014.
“I am in a similar situation as your writer as the guardian of a disabled adult. Special Needs Trusts are not necessarily as safe as an ABLE account as some of the myriad ‘qualification’ forms ask specifically about being the beneficiary of any trust. ABLE accounts are set up with legal protections against being a disqualifier for benefits. They are sponsored by states. … We have opted for a Virginia account (ABLENOW) for a Massachusetts resident so we can avoid that. We have also created a larger account (this is where a trust would come in) holding the estate that funnels into the ABLE account because the maximum annual donation amount is the IRS gift cap. I hope this is useful.”
Yes, I love it when readers help me answer questions.
Here are some key benefits of an ABLE account:
- Funds don’t count against income/asset limits for SSI and Medicaid.
- The original legislation specified that the disability must have begun before age 26, but that will expand to age 46 starting in 2026.
- These accounts are similar to 529 college savings plans, with tax-free growth and withdrawals for qualified expenses.
- Earnings grow tax-deferred, and withdrawals for qualified disability expenses are tax-free.
- Friends, family and the account owner can contribute.
- The money can be used for disability-related needs (housing, education, health care, etc.) without losing eligibility for benefits such as Medicaid or SSI, provided the balance stays below $100,000.
- ABLE accounts are offered through state-sponsored plans, such as ABLEnow in Virginia, but you don’t have to enroll in your own state’s plan. Just make sure to check if contributions could qualify for a state income tax deduction.
For more information, visit the ABLE National Resource Center website.
Real Life of an MSW 