ABLE accounts for a family member with a disability

How it works

The beneficiary must have a disability that began before age this year's official able onset age (not yet verified here; see the official source below) and must meet the Social Security definition of disability or have a doctor's certification. Anyone can contribute, and total contributions from all sources are capped at this year's official able annual contribution limit (not yet verified here; see the official source below) a year, with a working beneficiary able to add more under conditions the IRS lists. Earnings are tax free when spent on qualified disability expenses, which include housing, education, transportation, health, and basic living costs. The first this year's official able ssi resource disregard (not yet verified here; see the official source below) of the balance does not count toward the resource limit for Supplemental Security Income, and the account never counts for Medicaid eligibility. Money from a 529 can be rolled into an ABLE account for the same person or a family member. The beneficiary may qualify for the saver's credit on their own contributions.

What it gives

It lets a person on benefits hold savings without losing eligibility, which an ordinary bank account cannot do.

Qualified expenses are broad, and housing counts.

Contributions can come from family, friends, or the beneficiary's own wages.

What it costs, or where the catch is

The yearly contribution cap is modest, and a large gift cannot go in all at once.

Some states may seek repayment from the account for Medicaid costs after the beneficiary dies, under their own rules.

Only one ABLE account per person is allowed, and a person whose disability began after the age line cannot open one.

A worked example

Nora's brother Silas has a developmental disability that began at birth and receives Supplemental Security Income. Nora contributes $300 a month, which is $3,600 a year, to his ABLE account. After six years the balance is about $25,000 with growth, well under the amount disregarded for his benefits. When Silas needs a $1,800 wheelchair repair, the money comes out with no tax and no effect on his monthly check.

Where it goes wrong

The common miss is contributions from several relatives that together pass the yearly cap, since the limit is on the account, not on each giver.

Who confirms it for you

For your own numbers, a CPA or enrolled agent. This page explains how the rule works for people in general; it does not know your situation and does not tell you what to do.

The official source

IRS: ABLE accounts. Every figure that changes by year comes from the site's rules table, which the watcher checks against the official page on a schedule; where a figure is not yet verified, this page says so instead of printing a number.