Why ABLE Accounts Are a Smart Move in Special Needs Financial Planning

As a Special Needs Certified Financial Planner®, I understand the unique challenges families face when planning for the financial security of a loved one with a disability. One powerful tool in our planning arsenal is the Achieving a Better Life Experience (ABLE) account. These accounts offer individuals with disabilities a tax-advantaged way to save for disability-related expenses without jeopardizing eligibility for essential public benefits like Supplemental Security Income (SSI) and Medicaid.

Understanding ABLE Accounts

Established under the Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014, ABLE accounts are designed to help individuals with disabilities save for qualified expenses. Contributions to these accounts grow tax-free, and withdrawals used for qualified disability expenses (QDEs) are also tax-free. Importantly, funds in an ABLE account up to $100,000 are not counted toward the SSI resource limit, allowing beneficiaries to maintain their benefits while saving for future needs.

Eligibility Criteria for ABLE Accounts

To open an ABLE account, an individual must have a significant disability with an onset before age 26. This age threshold will increase to 46 starting in 2026, expanding eligibility to more individuals. Eligible individuals include those receiving SSI or Social Security Disability Insurance (SSDI) benefits. Alternatively, a person can qualify by obtaining a disability certification from a licensed physician, confirming a diagnosis of a physical or mental impairment causing marked and severe functional limitations.

Qualified Disability Expenses (QDEs)

Funds from an ABLE account can be used for a wide range of expenses that relate to the beneficiary's disability and help improve their quality of life. These include:

• Education and training
• Housing and basic living expenses
• Transportation
• Employment support
• Assistive technology
• Personal support services
• Health care and wellness
• Financial management and administrative services
• Legal fees
• Funeral and burial expenses

Using ABLE funds for non-qualified expenses may result in tax penalties and could affect eligibility for public benefits.

Contribution Limits and Tax Advantages

In 2025, the annual contribution limit for ABLE accounts is $19,000. However, if the beneficiary is employed and does not participate in an employer-sponsored retirement plan, they may contribute an additional amount equal to the lesser of their annual compensation or the federal poverty level for a one-person household.

Contributions to ABLE accounts are made with after-tax dollars, but the earnings grow tax-free, and withdrawals for QDEs are also tax-free. Some states offer state income tax deductions or credits for contributions to an ABLE account, providing additional tax benefits.

ABLE Accounts vs. Special Needs Trusts

While both ABLE accounts and Special Needs Trusts (SNTs) are tools to provide financial support without affecting eligibility for public benefits, they serve different purposes and can complement each other.

• ABLE Accounts: Ideal for managing smaller amounts of money for day-to-day expenses. They are easy to set up and allow the beneficiary to have control over the funds.
• Special Needs Trusts: Suitable for holding larger sums of money, such as inheritances or legal settlements. They are managed by a trustee and can pay for a broader range of expenses not covered by ABLE accounts.

In many cases, having both an ABLE account and a Special Needs Trust provides the most flexibility and financial security for the beneficiary.

Planning for the Future

As a Special Needs Certified Financial Planner®, my role is to help families navigate the complexities of financial planning for individuals with disabilities. ABLE accounts are a valuable component of a comprehensive special needs plan, offering tax advantages and preserving access to essential benefits.

It's important to consider the individual's unique circumstances, including their eligibility, financial needs, and long-term goals, when incorporating an ABLE account into their financial plan. Consulting with a financial planner experienced in special needs planning can ensure that the strategy aligns with the beneficiary's best interests.

For more information on ABLE accounts and to explore state-specific programs, visit the ABLE National Resource Center.