ABLE Accounts Offer Options for the Disabled

Parents wanting to contribute funds to benefit their disabled children or provide some additional assistance on their death have some options they did not possess even a few years ago. In 2014, one of these alternatives, known as an ABLE account, came into being by federal law. There are limitations but, for those who qualify, ABLE accounts could provide a less complicated although
potentially more limited alternative to the process of establishing and maintaining a supplemental needs trust.

The ABLE Act, otherwise known as “Achieving a Better Life Experience,” is a law that allows States to establish programs modeled after 529 plans but for disabled individuals. One catch is that, for a disabled individual to qualify his or her disability must have occurred prior to reaching the age of 26. The states set up their own plans and Pennsylvania’s plan is operational now.

These accounts are especially relevant for those developmentally disabled individuals who want to be able to save but are, by definition, limited both in their earning potential and with their limited income. Federal income and asset guidelines are especially strict for those who receive SSI due to their disability and limited income. This allows some additional flexibility.

Anyone can contribute to an ABLE account but it must be established and owned by the disabled individual or a parent or fiduciary acting on behalf of the disabled individual if that person is a minor or unable to act. The maximum total contribution from all sources including the disabled individual now is $15,000 per year although with recent changes in the tax law some additions from employment may be allowed. It is an attempt to provide sustainable funding and options for those with disabilities through accounts to which both disabled individuals and others can contribute recognizing that disabled individuals who receive SSI and Medicaid would not generally own liquid assets in excess of $2,000 in their own name.

ABLE is a new tool in a toolbox that currently includes third party, pooled and D4A supplemental needs trusts. Here is what you need to know.


  • Best for smaller funds for those who become disabled before age 26. If a disabled person on SSI or Medicaid now receives a small inheritance, for instance, he or she under prior law could lose benefits unless the funds are spent in the month of receipt or a D4A trust is established. If the funds are $15,000 or less and the recipient became disabled before age 26, under ABLE, these could be potentially placed in an ABLE account. Also, if a developmentally disabled person were to receive some funds for limited work, an ABLE account might be used to prevent personal funds from exceeding the $2,000 limit in account and thereby avoid loss of benefits.
  • Income is not taxed provided distributions are made for qualified disability expenses. As with traditional 529 plans which are for educational expenses and not taxed on distribution provided funds are used for the intended purpose, increase in value in 529A plans under the ABLE Act are not taxable on distribution if used for qualified disability expenses.


  • ABLE is a new tool in a toolbox that currently includes third party, pooled and D4A supplemental needs trusts. Here is what you need to know.
  • There can be only one ABLE account per beneficiary. You can set up one but only one ABLE account per beneficiary.
  • Contributions to an ABLE account cannot exceed $15,000 per year total. The amount that can be contributed to an ABLE account is $15,000 per year total from all sources. This means that, for instance, ABLE would be unlikely to replace D4A trusts set up to hold funds received from litigation. A child severely injured in an accident would still need a D4A supplemental needs trust to hold funds from a settlement or judgment.
  • ABLE accounts come with specific requirements that must be followed in order to maintain their status as ABLE accounts. If, as only one example, total contribution of more than $15,000 in a year is made, the account could lose its status as an ABLE account.

There is much more to learn about these accounts but the law is one step in the right direction.

About the Author Janet Colliton

Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.

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