Understanding an ABLE Account

A Simple, Less Costly But Powerful Alternative to Creating a Special Needs Trust (SNT)

An ABLE Account Can Hold Money for the Benefit of a Disabled Person Without Causing a Loss of Eligible Public Benefits

The ABLE Act became law on December 19, 2014, with the objective of creating a new option for individuals with disabilities (and their families) to save for the future, while protecting eligibility for public benefits. An ABLE account option is now a terrific alternative to a Special Needs Trust (SNT). Let me explain to you the basics of an ABLE account and how it can be used for the benefit of a qualifying individual.

Achieving a Better Life Experience Act (ABLE Act)

What is an ABLE Account?

An ABLE account is a tax-favored savings account for someone with a disability, diagnosed before the age of 26. Think of ABLE as a savings or checking account. Its purpose is to help individuals save ($$$) for disability-related expenses. Funds deposited into an ABLE account will be disregarded (or given special treatment) in determining eligibility for most federal means-tested benefits, like Medicaid, SSI, Section 8 housing, Food stamps, DDD, prescription assistance, etc. Income earned on an ABLE account also receives preferred federal tax treatment much like a 529 college/education account, in that the income tax is deferred and not taxed unless a withdrawal is made for a nonqualified disability expense which is subject to tax plus a 10% penalty.

Thus the benefit of having an ABLE account is that both the deposits placed into the account and payments made from the account allows a person with a disability to maintain his/her eligibility for government program benefits.

Who is Eligible for an ABLE Account?

To be eligible, an individual must meet two requirements:

  • First, there is an age requirement: The account beneficiary must have been diagnosed with a disability prior to their 26th birthday; an individual can satisfy their “age 26” requirement with a diagnosis from a doctor has a disability.  If you do not have a diagnosis, a certification supported by competent medical records and documentation under the direction of proper legal advice may suffice.
  • Second, the disability must result in functional limitations which are expected to last for 12 months or more, or if the person is blind, or the beneficiary meets the disability requirements for Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI).
  • If you have not been formally recognized as a person with a disability by the Social Security Administration, call me. We can likely help you understand the requirements.

Understanding Some of the Important Requirements of An ABLE Account

A person who qualifies to own an ABLE account may have only one ABLE account in existence at a time. You cannot have multiple ABLE accounts. The beneficiary of the account (meaning the person with the disability) must be the only account owner. The owner will always be the person with a disability. Another person such as a parent, a guardian, or a person with power of attorney can be given access or authority (i.e. power of attorney) over the account to assist the person in need.

While the law no longer imposes federal citizenship requirements related to establishing an ABLE account unless a given program requires that the participant be a US Citizen, it may be difficult to open an account without a social security number.

More Important Requirements of an ABLE Account

There are some additional provisions of the law you should consider before deciding if an ABLE account is right for you. First, the total annual contribution(s) to the account may not exceed the maximum annual federal gift tax exemption amount unless the beneficiary is working. The current exemption is $18,000 per year periodically adjusted upward for inflation.

Second, anyone, including the beneficiary, his/her family, friends, and others, can make contributions to an ABLE account. This means multiple individuals are allowed to make contributions to an ABLE account (parents, grandparents, siblings, etc.) each of whom can donate funds as a gift to an ABLE account.

Finally, the total $$$ value of the account cannot exceed the state limit for a 529A account. In New Jersey, the figure is $305,000, also adjusted annually. But beware!!! This $305,000 threshold applies only to Medicaid eligibility and not SSI eligibility. This is an important point. If your ABLE account exceeds $100,000 in 2024, you will lose your SSI eligibility but keep your Medicaid eligibility. If an ABLE account exceeds $305,000, the person with the disability will be ineligible for both programs.

What Expenses May the Funds From an ABLE Account Be Used For?

How the funds of an ABLE account can be spent is an important topic for you to understand.

Distributions from an ABLE account may be made for what is known as “qualified disability expenses”.  Qualified disability expenses are expenses that are related to the beneficiary’s disability and are for the benefit of that beneficiary only to maintain or improve his or her health, independence, and quality of life as defined by the Social Security Administration. The term qualified disability expenses can (in my opinion) be broadly interpreted and applied to permit the inclusion of basic living expenses as well as expenses for items that are a medical necessity. Some examples of qualified disability expenses include the following:

  • Education
  • Health and wellness
  • Housing
  • Transportation
  • Legal fees
  • Financial management
  • Employment training and support
  • Assistive technology
  • Personal support services
  • Oversight and monitoring
  • Funeral and burial expenses

Here is a cautioning point: Distributions made from the account which are deemed to be non-qualified expenditures will be subject to a 10% penalty for income tax purposes and may affect eligibility for federal means-tested benefits.

How Do ABLE Account Assets Impact Eligibility for Federal Benefits?

The short answer to the above question is that a correctly set up, properly administered ABLE account will not negatively impact state and federal benefits. ABLE account assets will be disregarded when determining eligibility for most federal means-tested benefits. But we need to evaluate the foregoing statement with two major federal benefit programs, SSI and Medicaid.


To remain eligible for SSI only the first $100,000 in an ABLE account will be disregarded. SSI payments (monthly cash benefit) will be suspended if the beneficiary’s account balance exceeds $100,000, but SSI benefits (eligibility) will not be terminated. Funds above $100,000 will be treated as resources.


Since ABLE account funds are disregarded in determining SSI eligibility, Medicaid benefits are not impacted by an ABLE account balance of less than $100,000. This $100,000 account balance limitation is a very important factor for SSI as I mentioned earlier on this page.

The Downside of an ABLE Account

Fredrick P. Niemann Esq.

The state of New Jersey is a priority creditor for any ABLE funds left upon death. If there are assets in an ABLE account when a beneficiary dies, the assets must be used to reimburse New Jersey for Medicaid payments made on behalf of the beneficiary after the creation of the ABLE Account, with one exception: a person with a disability can leave their ABLE account to another member of their immediate family with a disability. The state has to file a lien claim for those funds as the state is considered a creditor, not a beneficiary, of the ABLE account. Because of this, we need to always be sensitive to the beneficiary’s health. We can help you evaluate this issue further.

Does an ABLE account seem like a good fit for you but need more clarification and information? If so, let’s talk about your interest in an ABLE account.  Call my office today.  Ask for me to personally discuss your ABLE account.  I can be reached toll-free at (855) 376-5291 or e-mail me at fniemann@hnlawfirm.com.



Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Special Needs Trust Attorney