ABLE accounts offer eligible individuals with disabilities a tax-advantaged way to save money while maintaining eligibility for certain government benefits. The ABLE Act establishes the rules and requirements for all ABLE programs, including ABLEnow.
Here are some of the key rules associated with Achieving a Better Life Experience (ABLE) accounts.
Rules on Who Can Offer an ABLE Program
ABLE accounts are exclusively offered by qualified, state-administered ABLE programs. In 2015, Virginia became the first state in the country to pass ABLE legislation after the federal ABLE statute passed.
This state legislation authorized development of the Virginia-sponsored ABLE program, ABLEnow. And thanks to an amendment to the ABLE Act eliminating a state residency requirement, eligible individuals in all U.S. states can open an ABLEnow account online.
Rules Establishing Who Can Open an ABLE Account
ABLE accounts can be opened and managed by the eligible individual, subject to capacity. If they need assistance, an Authorized Representative can open and manage the eligible individual’s account.
The federal ABLE Act establishes two requirements for ABLE eligibility: an age restriction and a disability determination. Learn more about these rules in this article or by taking the ABLEnow eligiblity quiz. Both physical and mental disabilities may qualify someone.
Eligible individuals may only have one ABLE account at any time.
Rules on Contributing to an ABLE Account
Anyone can contribute to an ABLE account, including the account owner, family and friends. Annual contributions to an ABLE account are currently limited to $18,000 (2024). This amount is tied to the federal annual gift tax exclusion limit and may be adjusted periodically to account for inflation.
Working account owners who do not participate in an employer-sponsored retirement plan may be eligible to contribute above the annual ABLE contribution limit. Learn more about the ABLE to Work Act.
The maximum ABLEnow account value limit is currently $550,000.
Rules for Maintaining Disability Benefits
One of the most significant advantages of ABLE accounts relates to the ability to qualify for, or remain on, government assistance. Generally, funds saved in an ABLE account are exempt from resource limits.
Saving in an ABLE account does not impact Medicaid benefits, regardless of how much money is in the account. However, any amount over $100,000 in an ABLE account counts towards the individual’s resource limit and may cause Supplemental Security Income (SSI) benefits to be reduced or suspended.
While the intent of the ABLE Act is to allow individuals to save without impacting public benefits, consult with your benefits administrator or counselor for specific guidance tailored to your situation.
Rules on Spending Funds in an ABLE Account
Money in an ABLE account may be used to pay for a broad range of qualified disability expenses to maintain the health, independence and quality of life of the account owner. Account owners should maintain records in case of an Internal Revenue Service (IRS) audit.
For more information on the details associated with ABLE accounts, review the ABLEnow Frequently Asked Questions and ABLEnow Program Description.
Like most financial products, there are nuanced rules associated with ABLE accounts. Despite the complexities, many individuals and advocates in the disability community consider ABLE accounts to be an essential financial tool.
Information as of January 1, 2024.