A New Tool for Disability Savings
For decades, people with disabilities faced an impossible choice: save money and lose essential government benefits, or stay poor to keep benefits they depend on. ABLE accounts changed this equation.
ABLE (Achieving a Better Life Experience) accounts allow individuals with qualifying disabilities to save money in a tax-advantaged account without losing SSI or Medicaid eligibility—up to $100,000 without affecting SSI benefits.
Who Can Open an ABLE Account?
To be eligible for an ABLE account, the individual must have a significant disability that began before age 26 and either be receiving SSI or SSDI benefits, or be able to certify that they meet Social Security’s disability criteria.
The age-26 requirement refers to when the disability began—not the person’s current age. An adult who became disabled before age 26 can open an account at any age.
Note that recent legislation has proposed raising the age-of-onset requirement to 46. Check current rules when planning.
Contribution Limits
ABLE accounts have annual contribution limits tied to the gift tax annual exclusion—currently $17,000 per year (2023). This means all contributions from all sources (family, friends, the account owner) cannot exceed $17,000 in a single year.
Additionally, there are total account balance limits set by each state’s program (Louisiana’s limit is tied to its 529 plan limits, currently several hundred thousand dollars). However, for SSI purposes, only the first $100,000 is disregarded—amounts above $100,000 cause SSI benefits to be suspended (but not terminated).
Qualified Disability Expenses
ABLE account funds can only be used for qualified disability expenses (QDEs), which include education (tuition, books, tutoring), housing (rent, mortgage, utilities, property taxes), transportation (vehicle purchase, maintenance, public transit), employment support (job training, assistive technology for work), health and wellness (medical expenses, mental health services, gym memberships), assistive technology (adaptive equipment, accessibility modifications), personal support services (aide services, in-home support), and financial management and administrative services.
This is a broad list—most expenses that help the account owner maintain or improve their health, independence, and quality of life qualify.
ABLE Accounts vs. Special Needs Trusts
ABLE accounts and special needs trusts are both tools for holding assets without affecting benefit eligibility, but they serve different purposes.
ABLE accounts have annual contribution limits of $17,000, effectively hold up to $100,000 for SSI purposes, require disability onset before age 26, allow the account owner to control funds, have low setup costs, feature simple ongoing administration, and require Medicaid payback at death.
Special needs trusts have no contribution limit, no limit on amount held, have no age requirement for third-party trusts, are controlled by a trustee, require attorney fees to establish, involve trustee responsibilities for administration, and require payback only for first-party trusts (not third-party).
When to use ABLE accounts: for smaller amounts (under $100,000), when the account owner can manage their own finances, and for simple savings needs.
When to use special needs trusts: for larger amounts, when disability onset occurred after age 26, for more complex management needs, and when you want to avoid Medicaid payback (third-party trusts).
For many families, using both—an ABLE account for smaller, readily accessible funds and a special needs trust for larger amounts—provides the best of both worlds.
ABLE Account Payback Requirements
Like first-party special needs trusts, ABLE accounts are subject to Medicaid payback. When the account owner dies, any remaining funds must first reimburse Medicaid for benefits paid during the account owner’s lifetime.
This is an important consideration when deciding between an ABLE account and a third-party special needs trust, which has no payback requirement.
Using ABLE Accounts for Housing
One significant advantage of ABLE accounts over special needs trusts is housing expenses. Special needs trust payments for rent or mortgage can reduce SSI benefits under the “in-kind support and maintenance” rules. ABLE account payments for housing, while they may still have some impact, are treated more favorably in many circumstances.
This makes ABLE accounts particularly useful for housing-related savings.
Opening a Louisiana ABLE Account
Louisiana residents can open an ABLE account through Louisiana’s STABLE Account program or through many other states’ programs that accept out-of-state residents. When choosing a program, consider investment options, fees and expenses, ease of use, and customer service.
We can help you evaluate options and determine which program best meets your needs.
Contact Louisiana ABLE Account Attorneys Today
ABLE accounts are a valuable tool in the special needs planning toolkit. Legacy Estate & Elder Law helps families understand when ABLE accounts are appropriate, how to coordinate them with special needs trusts, and how to maximize their benefits.
We serve families throughout Louisiana from our offices in Baton Rouge, New Orleans, and Lake Charles. Contact us today to schedule a consultation.