ABLE Accounts: A Great Deal for the Disabled and Their Families

1/10/2021

Sixty-one million adults and over 12.6 million children in the United States have some type of disability.

If you have a disabled or blind child or other family member, or are disabled or blind yourself, you should know about ABLE (Achieving a Better Life Experience Act) accounts. These tax-advantaged accounts can be a real game changer for the disabled.

Ordinarily, a disabled person who receives government benefits can have only $2,000 in cash or other countable assets. This can make it impossible for disabled people to save money for emergencies, buy a house or car, or take a vacation.

This is where ABLE accounts come in. Contributions to ABLE accounts up to certain levels are not counted for purposes of means-tested programs for the blind and disabled. Disabled people can have up to $100,000 in an ABLE account without losing Social Security disability benefits.

Contributions to ABLE accounts are not deductible for federal income tax purposes, but the money in the account grows tax-free. Withdrawals are also tax-free if made for a variety of living- and disability-related expenses.

Up to $15,000 in total can be contributed to an ABLE account each year. Contributions can come from the disabled beneficiary, from family, and from friends. Disabled people who work can put in an additional amount limited to the lesser of their compensation or $12,490 in 2021.

A total amount of $300,000 to $500,000 can be deposited into an ABLE account, depending on the state. There is only one real drawback to ABLE accounts: they are available only for people who became blind or disabled before reaching age 26. This eliminates the majority of the disabled.

ABLE accounts are run by the states. Forty-two states and the District of Columbia have them. You don’t have to set up an account in the state where you live, and it can pay to shop around.

By the way, if you have a special needs trust, you can keep it. An ABLE account can be set up in addition to a special needs trust.

If you have any questions or need my assistance, please contact us!

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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.

Keana founded this website and decided and created this blog page to offer a space for those seeking knowledge to understand, however not to be confused with advice or planning strategies.

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