ABLE and Special Needs Planning

The ABLE (Achieving a Better Life Experience) account

ABLE accounts are tax-advantaged savings accounts for individuals with disabilities.

The ABLE (Achieving a Better Life Experience) Act became law on December 19, 2014. The law recognizes the financial strains faced by individuals with disabilities and aims to help by making tax-free saving accounts available to cover qualified disability expenses.

 The ABLE account is also known as a 529A account, making its relationship with 529 college savings accounts clear.  Both accounts provide a tax-advantaged means of saving for the future: the 529 for a college education and the 529A to fund supports for living and enriching daily life. 

While there are eligibility requirements and restrictions on the account,  the ABLE account offers a tax-advantaged way to save money without impacting eligibility for means-tested government benefits (e.g. SSI, Medicaid).


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64 million AMERICANS


1 in 4 adults in the U.S . are living with a disability. The ability of the government to provide supports meeting the needs of all is, and will continue to be, limited. 



It is important for everyone to save for the future and people with disabilities are no exception.


1 in 4 adults in the U.S . are living with a disability. The ability of the government to provide supports meeting the needs of all is, and will continue to be, limited. 


It is important for everyone to save for the future and people with disabilities are no exception.


Let's begin with the basics

The ABLE account is an important financial planning tool available today to help individuals and families to save.  



ABLE account basics

  • ABLE or 529 (A) Accounts are tax-advantaged savings accounts for individuals with disabilities.
  • Eligible individuals and their families will be allowed to establish ABLE savings accounts that will not affect the individual’s eligibility for SSI, Medicaid and other means tested public benefits.
  • The beneficiary of the account is the account owner.
  • An individual may only have one ABLE account.
  • Contributions to an ABLE account:
    • may be made by any person (the account beneficiary, family and friends).
    • are made using post-taxed dollars.
    • are not tax deductible, although some states may allow for state income tax deductions for contribution made to an ABLE account. 

ABLE eligibility

  • Accounts can be established by or on behalf of a person with a disability, provided that the beneficiary's disability began before age 26.
  • If the person with a disability meets this age criteria and receives SSI and/or SSDI, they are automatically eligible to establish anABLE account.
  • If the person with a disability does not receive SSI and/or SSDI, but meets the age of onset requirement, they may be eligible if they meet Social Security’s limitations criteria and receive a letter of certification from a licensed physician.
  • The account owner may be any age but again, the age of onset of disability must have occurred before their 26th birthday.

ABLE contributions and limits

  • The total annual contributions by all participating individuals, including family and friends, for a single tax year in 2022 is $16,000. Under current tax law, $16,000 is also the maximum amount that individuals can make as a gift to someone else and not report the gift to the IRS (gift tax exclusion).
  • The total contributions that can be made to an ABLE account is subject to each individual state's 529 savings account limits. Many states have set this limit at more than $300,000 per account.In addition to the annual contribution limit of $16,000, an ABLE account owner who works and does not participate in an employer sponsored retirement plan may also contribute his or her compensation up to the federal poverty level (FPL) amount for a one-person household.The FPL amount applicable to 2022 ranges from $13,590 for individuals who live in the continental USA, to $16,990 for individuals who live in Alaska or $15,630 for individuals who live in Hawaii.
  • The first $100,000 in an ABLE account is not counted as an asset for purposes of SSI eligibility. Once an ABLE account balance exceeds $100,000, the beneficiary's SSI payments are suspended until the account balance drops below $100,000. However, the beneficiary remains covered by Medicaid regardless of the account balance.
  • Be aware: The ABLE has a “Medicaid Pay-Back” provision. Any monies remaining in an ABLE account when an owner dies may be subject to a reimbursement claim by Medicaid for expenses from the time the account was open.


Opening and investing an ABLE account

  • Regardless of where you might live and whether or not your state has decided to establish an ABLE program, you are free to enroll in any state’s program provided that the program is accepting out of state residents. To determine which state ABLE programs are accepting out of state programs, please refer to the individual state pages. 
  • Examples of state ABLE programs accepting enrollment nationwide include Ohio, Nebraska, and Tennessee. An example of a state ABLE program only accepting in-state residents would include the Florida ABLE United program.
  • Like 529 college savings plans, states are likely to offer qualified individuals and families multiple options to establish ABLE accounts with varied investment strategies. You will need to align your investment choice with when and how you plan to use the funds in the ABLE and your risk tolerance. You may change your investment choices in your ABLE account up to two times per year.

Trying to take this all in?

Our ABLE Account and Special Needs Planning E-Book has it all.

3 great things about the ABLE account

While the ABLE account should not be the cornerstone for your financial planning, it is an additional tool to be used to complement your savings strategies. Here are 3 reasons to consider adding an ABLE to your savings accounts. 

protect government benefits

Eligible individuals and their families may establish ABLE savings accounts that will not affect their eligibility for SSI, Medicaid, and other public benefits.

Money grows tax-free

Income earned in ABLE accounts will not be taxed provided the funds, when withdrawn, are used for qualified expenses.

Pay for Housing related expenses and more Qualified Disability expenses may include: education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services and other expenses, which help improve health, independence, and/or quality of life.

Tips for choosing a savings option

Depending on a parent’s estate size and planning, keeping it simple and saving for the child directly in the parent’s own name is a choice to be considered.  While this has benefits and drawbacks from a purely financial point of view, it gives the parent complete control of how funds are spent.  

While the choice of a savings vehicle is important, regardless of how you save- in an ABLE account, a trust, in your own name or another vehicle- the important thing is to save money for the lifetime support of your family member with a disability. 

IMPACT ON GOVERNMENT BENEFITS Many individuals with disabilities and their families depend on a wide variety of public benefits for income (from SSI), health care (through Medicaid), food (with SNAP), and housing assistance (by Housing and Urban Development [HUD] vouchers). These public benefits require a means-test or resource-test that limits eligibility to individuals with less than $2,000 in their name either in savings accounts, retirement accounts, or other assets. With the ABLE Act, eligible individuals and their families will be allowed to establish ABLE savings accounts that will not affect their eligibility for SSI, Medicaid, and other public benefits.
Tax implications

Parents should consider the tax considerations of both their own and their child's savings accounts. In the case of the ABLE account, earnings in the account grow tax-free however, distributions must be for a “qualified disability expense.” in order to maintain this tax-free status. 

Money in an ABLE account can be used to pay for housing-related expenses. This is an important benefit as qualified distributions from an ABLE account will not be counted as in-kind support or ISM. 

Payback Provisions

Upon the death of an ABLE account beneficiary, in many states, Medicaid will be reimbursed for expenses paid on the beneficiary’s behalf from the remaining balance in the ABLE account. This is more commonly known as the Medicaid payback provision.

It is possible that a particular state’s Medicaid program may not seek payback recovery from ABLE accounts that are established from the state’s plan for a resident of that state. If the beneficiary moves from one state to another, these payback provisions may be different. It is important to understand the payback provisions of your state’s plan or the plan that you select if the beneficiary receives or will receive Medicaid services.


ABLE Planning Stories

Jonathan's Story Funds in an ABLE account may be used for housing, food, and support expenses, without incurring an offset of SSI.


Jonathan, a man with mental health issues, was living in a condo owned by his parents. He used his SSI money to pay for his groceries, going out to eat, his cell phone plan, and other things that he wanted. Mom and Dad covered the expenses of the condo: the condo fees, insurance, and taxes. Because of this, Jonathan’s SSI income was drastically reduced. When the family inquired, they were told that because the parents paid for his housing expenses, the government treated it as in-kind income, or ISM, which offset his SSI payments. The planning strategy here was for the parents to fund an ABLE account and have their son use these funds to pay them fair market rent of about $1,000 per month. Jonathan would still have the ability to use his SSI funds for his other needs.


Michael's Story ABLE to work and contribute more to ABLE.


Michael works in a local grocery store earning $17,000 per year, but he was not eligible to contribute to his employer’s 401(k) plan. Because he lives at home with his parents, Michael does not spend all his earnings, and he found it difficult to keep his bank account under the $2,000 limit for his SSI and Medicaid benefits. His parents funded an ABLE account for him with $15,000 from their savings. Even better was that Michael was able to save an additional $9,000 per year in the ABLE account and protect his eligibility for his government benefits while proudly continuing to work.

Lisa's story Money from a SNT funds and ABLE account

Because the trustee of Lisa’s trust could use the funds only to supplement what her government benefits provided (food and housing), they could not pay for a more expensive two-bedroom apartment, which would provide the extra space Lisa needed for her art room. The trustee was able to fund $15,000 from her SNT to an ABLE account. The ABLE account funds helped pay for the larger apartment. The funds from the SNT were used to supplement other disability related expenses, including Lisa’s art supplies, because they were considered part of her therapy.

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An ABLE, A Special Needs Trust or Both? 

apple_pexels-john-finkelstein-1630588It is mid-afternoon and you are a bit hungry. Will you choose to eat an apple and a handful of almonds or a few chocolate chip cookies? 

An ABLE account and a Special Needs Trust (SNT) may both provide money for a person with special needs and protect their eligibility for government benefits, but they are very different options. 

While the choice of how to save for your child’s (or grandchild’s) future is infinitely more important than making the snack decision, the principle is the same. Making the choice that best fits your goals and circumstances will yield the most satisfying outcome.  

I. The ABLE Account

The role of an ABLE account in planning for a person with special needs is as a “wealth accumulation”   vehicle or in simple terms, a way to save money.  

II. A Special Needs Trust (SNT)

SNT, specifically, a 3rd party or supplemental needs trust, will be classified as an “estate planning” vehicle for the parent (or grandparent) rather than an optimal account in which to save for their child's future during their lifetime.  (There are specific circumstances however, when a SNT will be funded during the parents’ lifetime.)

Read a detailed, side-by-side analysis of the (very different) ABLE Account and SNT.

Retirement Accounts, Special Needs Trusts and the ABLE Account

Retirement accounts may act as powerful financial and estate planning tools and present a unique opportunity to plan for children with special needs. Each family's planning strategy will differ depending upon their own circumstances and the level of their assets held in retirement vs. non-retirement accounts.

Here are 2 examples illustrating the use of retirement account assets in special needs planning. 

I. A person with disabilities may qualify as an exception to the “10-year Rule”.

The Setting Every Community Up for Retirement Enhancement or SECURE Act - effective January 1, 2020 - made important changes for both retirement account owners and beneficiaries to consider in their financial planning. One major change was the replacement of the "stretch" provision, in which a beneficiary could take distributions from an inherited IRA over the course of their lifetime, with the “10-year rule”. The "10-year rule" states that non-exception beneficiaries are required to take a full distribution of the assets held in an inherited IRA within a 10-year period.  

As an exception to the 10-year rule, qualified individuals with disabilities (see Internal Revenue Code Section 72(m)(7) for definition of disability) retain the ability to take distributions throughout their lifetime.  One simple planning strategy for retirees to consider is having a properly drafted SNT as a beneficiary of their retirement account. The beneficiary may receive distributions from the retirement account. Perhaps these annual RMDs may fund their ABLE account. Any assets remaining after their lifetime will be distributed to individuals in accordance with the trust document.  These heirs will then be subject to the "10- year "rule.

Read When a Special Needs Trust is a Beneficiary of a Retirement Account.

II. Are you a candidate for a Roth IRA Conversion?  

 If you want to leave retirement assets to your heirs, converting some or all of these assets to a Roth IRA is a strategy to consider.  Ask yourself (or your accountant) the following questions: 

  •  Is my current tax rate lower than my anticipated future tax rate? 
  •  Do I have space in my marginal tax bracket above my current level of taxable income?  
  • Am I OK with paying taxes today to leave a tax-free legacy for my heirs? 

If you answered “yes” to the above questions, it may be time to talk with your tax and estate planning professionals to determine if it makes sense to convert some of your retirement savings to a Roth IRA this year.   

Read The 10-year Rule and After-Tax Strategies to Consider .  

Assessing Your ABLE Account Investment Choices 

As part of an advisory group implementing the ABLE account in Massachusetts, we learned that many people opening ABLE accounts stopped the application process when they were asked to determine the investment choices for their contributions. This behavior raised a concern that individuals enrolling in the ABLE program might not have adequate prior experience or knowledge of financial matters to confidently make the best selection for their situation.

Depending on when you put funds in, your account may have increased in value or have decreased due to market fluctuations.  For investors with little experience, it may be a shock to observe 90 cents where they had invested a dollar a short time earlier.  Regardless of how much money is in the account, it is critical to invest the funds in the ABLE account to meet the goals of the account owner.

Key Considerations for Your Investment Choices

  1. When determining your asset allocation (the balance between stocks, bonds and money markets), think about your personal ability to withstand a decline in your account balance and your tolerance of market volatility .
  2. Be sure to align your asset allocation with the timing of your goals; the investments in the account should match how the funds in the account are being used.

Depending on the goals for the account, the funds may be invested to provide a mix between funding for transactions in the near term and growth for the future. For example, if a portion of the funds in the ABLE are to be used for transactions, you should consider investing these monies in very low risk assets, such as money market funds.  Asset allocation should be a thoughtful and informed evaluation; federal law allows account owners to change investments in their ABLE account twice per year.  Be sure you are comfortable that the money is invested to meet both your short-term needs and your long-term goals. 

Case Study: Paul's ABLE Account Investment Choices

Paul and all other elements of this example are fictitious and all investment results are hypothetical.

Paul is an ABLE account owner. He works and has contributed about $5,000 of his earnings to his ABLE account over the course of the year. Paul was saving money in his ABLE to buy furniture for his apartment, and his parents decided to contribute $10,000 toward that goal to Paul’s ABLE account. Paul chose a growth portfolio for his ABLE, investing 70% in stocks and 25% in bonds and 5% in money market securities. At the end of the year, the stock market had taken a fall and the $15,000 contributed to the account over the course of the year was worth only $12,000 (return is hypothetical).

While Paul and his parents believe his account will recover the $3,000 loss over time, he has to rethink and/or postpone the furniture purchase he hoped to make in the spring. Since Paul had a near-term use for the funds he invested in his ABLE account, he needed to choose investments that may have offered a lower return but had little to no risk to this principal. He could have chosen the growth portfolio for a portion of the contributions and kept the remainder in another, more conservative fund or money market.

Like Paul, many individuals who have opened ABLE accounts may not be overly experienced with investments and should review and reassess their investment choices based upon the key considerations outlined above.


Additional articles about the ABLE account


Ready to start planning?


  • The Special Needs Planning Guide, How to Prepare for Every Stage of Your Child's Life, Haddad/Nadworny, 2021, Brookes Publishing.

Affinia Financial Group conducts business under the Special Needs Financial Planning name. Advisory services offered through Affinia Financial Group, LLC,  a registered investment advisor. 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual, nor intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. There is no assurance that the techniques and strategies discussed are suitable for all individuals or will yield positive outcomes. 

The experiences described here may not be representative of any future experience of our clients, nor considered a recommendation of the advisor's services or abilities or indicate a favorable client experience. Individual results will vary.