The ABLE Act Helps Those With Special Needs

The Achieving a Better Life Experience (ABLE) Act was signed into law in December of 2014. The purpose of the Act was to provide individuals and families the ability to finance disability needs tax-free. The savings vehicle provided by the ABLE Act is similar to the 529 education savings plan. The ABLE Act allows families to save up to $100,000 in a special account to pay for disability-related care without risking eligibility for benefits such as Medicaid or Supplemental Security Income (SSI) because these assets aren’t counted towards the need-based asset thresholds for these programs. To be eligible for an ABLE account, the beneficiary must be someone who had an onset of a disability before age 26, and either receives Social Security Disability Insurance (SSDI) or files a disability certification under IRS rules. (The beneficiary doesn’t have to be under age 26 at the time the ABLE account is set up, but rather have had the disability onset before 26 years of age.)

The expenses which are exempted from taxation under an ABLE account include expenses for education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, and funeral and burial expenses. Also, states may choose to approve other expenses under their own regulations.

What happens if my account value exceeds $100,000?

If the assets in an ABLE account exceed $100,000, then the beneficiary’s SSI benefit payments will be placed in suspension until the account value returns to below the $100,000 threshold. When the account value returns to under $100,000, the SSI benefit payments will automatically resume with no need for re-application.

The assets held in an ABLE account will not affect eligibility for Medicaid even if they increase above $100,000.

How does an ABLE account work?

Any earnings made in the account from contributions will accumulate tax free at the federal level if the earnings are used to pay for disability-related expenses. This may also be true at the state level, depending on which state one lives in. If the funds are used for non-qualified expenses, then the earnings portion of the withdrawal will be taxed at one’s normal rate and subject to a 10% federal penalty. There are no federal tax breaks for contributions made into the account, only the earnings are tax-deferred. However, individual states have the option to provide tax incentives for contributions. In the event that the beneficiary of the account passes away, the state-run Medicaid agency may have the right to claim reimbursement up to the value of the Medicaid services provided to the beneficiary, depending upon state estate recovery laws.

Is the ABLE account program available in all states?

Currently, the ABLE account program is available in 35 states and the District of Columbia. However, if one lives in a state that doesn’t offer an ABLE account, he or she can still take part in this program. Anyone may enroll in another state’s ABLE account program (even if one’s home state offers an ABLE program) as long as that other state stipulates they are accepting out-of-state resident applications.

Are there limits on how much I can contribute to an ABLE account?

Currently, the total annual contributions that are allowed into an ABLE account is $15,000, which includes contributions made by family and friends. This amount may be adjusted periodically to account for inflation. The total contribution limit for an ABLE account differs by state, but remember, if the value exceeds $100,000, SSI payments will be suspended.

The ABLE Act can be a life-changing savings vehicle for those with special needs and their families. If you would like to learn more, or have questions about special needs planning, please do not hesitate to contact our office at (615) 989-7054.

About the Company:

Heritage Law Group, PLLC is a boutique Estate Planning and Elder Law firm assisting residents in Tennessee and Kentucky. We are dedicated to providing client-centered, professional legal services that are individualized through one-on-one consultations. We delight in empowering our clients and community through education and providing specialized resources. Our integrity-driven team will help you protect your legacy while delivering outstanding quality at a reasonable cost.

Owner, Jake Mason, J.D., LL.M. (Elder Law & Estate Planning), EPLS, is board-certified in Estate Planning and Probate, accredited by the United States Department of Veterans Affairs, and licensed in Kentucky and Tennessee. Contact us to schedule a consultation at (615) 989-7054 or

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Heritage Law Group, PLLC

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Gallatin, Tennessee 37066

Phone: (615) 989-7054

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Visiting this site does not create an attorney-client relationship with Heritage Law Group, PLLC. Tennessee law requires notification that this is an advertisement and this website is not intended to provide legal advice. If you are seeking legal advice, you must seek it by speaking directly to a licensed attorney. While our firm welcomes feedback, we cannot accept a new legal matter without making sure there is no conflict of interest with other client matters in which we are already involved and there is no other conflict of interest that might prevent us from representing you. Unless otherwise noted, all Heritage Law Group, PLLC attorneys are generally licensed to practice law in the State of Tennessee. Attorney Jacob Mason is also licensed to practice law in the State of Kentucky. Every situation is unique and you should not act on information contained in this website without seeking advice from a legal professional specific to your particular situation. 

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