Special Needs Planning - Changes to ABLE Accounts

Tuesday, January 15, 2019 |

Financial planning for families with individuals with special needs is complex, intricate, and ever-changing. We want to take the time to discuss some strategies that can have a significant impact on families who are caring for individuals with special needs, and some changes that will be affecting these families in 2019.

Achieving A Better Life Experience (ABLE) Act

  • Was passed in 2014.
    • The Act created ABLE Accounts that can be used for individuals with disabilities that began before they turned 26 years old.
    • As of 2019, the maximum annual contributions to any single ABLE Account is $15,000.
      • Note: The total annual amount is $15,000, per beneficiary, and there can only be one ABLE account per eligible individual, for instance, you can have 3 people give $5,000 each to the account or any other combination that does not exceed $15,000.
      • Contributions are post tax and are not tax deductible.
      • Interest earned by the account is not taxed.
  • The ABLE Account balance can be used on “Qualified Disability Expenses” which are defined as; “expenses related to the designated beneficiary as a result of living a life with disabilities” SOURCE: ABLE National Resource Center
      • These expenses can include education, transportation, employment, training and support, assistive technology, personal support services, health care expenses, financial management and administrative services, and/or quality of life expenses.
  • As of 2015, regardless of where you live or if your state has an ABLE program, you’re free to enroll in any state’s program.
  • Investment options differ by state. Generally, each state offers between 4-6 investment options ranging from aggressive (90% invested in stocks) to conservative (100% invested in a Money Market Account).
  • Income used for nonqualified purposes are taxed and assessed a 10% penalty.
  • Balance can grow to $100,000 without affecting SSI, once the balance goes over $100,000 then Supplemental Security Income (SSI) is suspended, until the balance drops back below $100,000. Note: At no point will the ABLE Account balance affect ability to receive Medicaid assistance. If SSI is not an issue, ABLE accounts allow for growth up to $250,000 or $350,000 based on the state regulations.
  • The new tax law also allows for tax-free rollovers from 529 plans to ABLE Accounts.
  • As of 2019, The pay-in cap has increased. Account beneficiaries who work can now make an additional $12,140 contribution over the annual $15,000 limitation. This figure is higher for individuals living in Hawaii or Alaska.

The ABLE Act was a large step in the right direction of recognizing the increased cost of care for someone with disabilities. The rapid adoption displayed above illustrates the need that the ABLE Act is attempting to meet. Currently, if an individual is receiving (SSI) benefits based on a disability, that individual cannot have more than $2,000 in assets or their benefits will be discontinued. The ABLE Act along with the use of Special Needs Trusts and other planning strategies allow for these individuals with disabilities to receive the beneficial use of gifted assets without disqualifying them from public benefits.

In Ohio, the STABLE website offers insight into the benefits of opening an ABLE account. A new feature is the “STABLE Card.” This is a debit card that can be pre-loaded with up to $15,000 for use by the beneficiary. The card can be used for any of the qualified expenses listed above.

Note: If the beneficiary should pass away, the state of residence may file a claim to all or a portion of the remaining ABLE account balance, this is known as the “Medicaid Pay-Back Provision.” Some states have passed laws that would prohibit this Medicaid payback provision. It is important to familiarize yourself with your states’ laws and regulations before opening an ABLE Account. In some circumstances, a Special Needs Trust or even a 529 plan can be a viable option for accumulating wealth for an individual with special needs. SOURCE: Forbes

To find which states’ plan works best for you, please visit the ABLE Program Compare Website.


None of the information in this document should be considered as tax advice. There is no guarantee that any strategies discussed will result in a positive outcome. You should discuss any legal, tax or financial matters with the appropriate professional concerning your individual situation. All investing involves risk and no investment strategy can guarantee a profit or protect against loss, including the potential loss of principal.

When you click on any links in this document you will be connected to a third-party site. We make no representation as to the completeness or accuracy of information provided at this site. Nor are we liable for any direct or indirect technical or system issues or consequences arising out of your access to or use of this third-party site. When you access this site, you assume total responsibility and risk for the site you are visiting.

Participation in a 529 College Savings Plan (529 Plan) does not guarantee that contributions and investment return on contributions, if any, will be adequate to cover future tuition and other education expenses or that a beneficiary will be admitted to or permitted to continue to attend an educational institution. Contributors to the program assume all investment risk, including potential loss of principal and liability for penalties such as those levied for non-educational withdrawals.

An investor should consider, before investing, whether the investor's or designated beneficiary’s home state offers any favorable state tax treatment or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Consult with your financial, tax or other adviser to learn more about how state-based benefits (including any limitations) would apply to your specific circumstances. You may also wish to contact your home state or any other 529 college savings plan to learn more about the features, benefits and limitations of that state’s 529 college savings plan. Furthermore, the Tax Cuts and Jobs Act that was signed into law on December 22, 2017 allows for up to $10,000 a year per beneficiary in tax free distributions from a 529 Plan if used for tuition incurred for enrollment or attendance at a public, private, or religious elementary or secondary school. Check with your state’s guidelines prior to withdrawing the funds.

For more complete information, including a description of fees, expenses and risks, see the offering statement or program description.