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5 things you should know about ABLE accounts

In June of 2016, the first states began to offer ABLE accounts, a new type of tax-advantaged savings account for Americans with significant disabilities.

Promo image that displays "5 things you should know about ABLE accounts" in front of a background of three men with disabilities working on a craft projectABLE Accounts were created by the Achieving a Better Life Experience Act of 2014 so that Americans with disabilities and their families can build savings. Contributions of post-taxed dollars can be made by anyone including the beneficiary, family, and friends. While the contributions are not tax deductible, withdrawals and investment income earned from ABLE accounts will not be taxed.

If you are considering an ABLE account for yourself or a loved one, here are five things you should know:

1. You can open an ABLE account, no matter where you live

Similar to 529 higher education savings plans, ABLE accounts are operated by individual states. At least 35 states are in the process of planning and implementing programs, but it is likely some states will choose not to create ABLE programs. ABLE accounts are now available in Florida, Nebraska, Ohio, and Tennessee.

Luckily, some states, but not all, will allow ABLE accounts to opened by non-residents. Details of the ABLE programs will vary state to state, including fees and investment options, so this allows families to choose the account that works best for them. 

Currently, Nebraska, Ohio, and Tennessee offer nationwide enrollment. There may, however, be some additional costs for out-of-state accounts. Ohio, for example, charges double its usual monthly fee ($2.50) to residents of other states.

2. Anyone can contribute to an ABLE account, but there are financial limits

Contributions to ABLE accounts can be made by anyone including the beneficiary, family, friends, neighbors, etc. There is, however, an annual limit of $14,000 for each individual contributor.

The total limit of contributions to an ABLE account will vary by state, and many have indicated it will be over $300,000. But for recipients of Supplemental Security Income, there are some limitations. Continue reading to learn more about benefit eligibility. 

3. ABLE accounts will not impact your eligibility for benefits

One of the primary purposes of ABLE accounts is so individuals with disabilities and their families can build savings without losing eligibility for critical benefits such as healthcare. Many public programs have asset limits of $2,000, which can force individuals with disabilities to sacrifice income and savings.

ABLE accounts provide an opportunity to build savings while remaining eligible for programs like Supplemental Security Income (SSI). ABLE accounts will not have an impact on Medicaid edibility, and the first $100,000 saved in ABLE accounts is exempt from SSI income eligibility tests.  

4. ABLE account funds can be used for any expense related to living with a disability

ABLE account savings can be used tax-free to cover a broad definition of expenses related to living with a disability. This can include basic living expenses, education, assistive technology, hiring personal care attendants, accessible housing, healthcare costs, transportation, and much more.

5. Not all Americans with a disability are eligible for ABLE accounts

ABLE account eligibility is limited to individuals with significant disabilities that began before 26 years of age. People meeting that criteria who also receive SSI or disability benefits are automatically eligible. Others will require certification from a doctor.

Learn more about ABLE accounts from the ABLE National Resource Center, managed by the National Disability Institute.

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