ABLE accounts are bank accounts that allow people with special needs to save money without jeopardizing their disability benefits.
ABLE accounts come from the federal ABLE (Achieving a Better Life Experience) Act, but they are established and managed on a state level. Florida was one of the first states to enact legislation implementing the Act.
When people with special needs apply for means-tested disability benefits, they must show that they do not have enough money to support themselves independently. Any money a person has in a traditional bank account count against that person’s ability to qualify for disability benefits.
As a result, people with special needs are not able to build savings with the money they earn or that they receive through inheritance or gifts. On a day-to-day basis, this means that people with special needs must live with very little money if they want to receive government aid.
ABLE accounts give people with special needs the opportunity to manage a bank account without penalty against their eligibility for SSI, Medicaid, or other government benefits.
In order to open an ABLE account, you must have a disabling “condition that began prior to reaching age 26” and you must fall under the Social Security administration’s definition of “disabled” for children. (CFR §416.906.)
As of 2018, contributions are capped at $15,000 per year. This limit is equal to the annual personal gift tax exclusion, so it will rise every few years. Also, to be clear, this is per account, not per donor.
For many, the account cannot exceed $100,000. For those who qualify for SSI, the balance of an ABLE account cannot exceed $100,000, or the SSI will be suspended until the balance falls below $100,000. The good news: even if SSI is suspended, you remain qualified for Medicaid if you are receiving Medicaid. For those who do not qualify for SSI or for proper reasons believe suspension of SSI is a better plan, the account can reach the limit allowed for 529 plans in that state. In Florida, this limit is 418,000.
Funds must be used for Qualified Disability Expenses (QDE). QDE are expenses that are “related to the blindness or disability” of the account holder. Thankfully, this is a fairly broad definition and can include expenses for housing, education, transportation, employment training, health and wellness, financial management, legal fees, and more.
For more information on Florida’s ABLE program, check out: http://www.ableunited.com/