Carnegie Investment Counsel Blog

Financial Planning for People With Disabilities: Understanding ABLE Accounts

Posted by Carnegie Investment Counsel on Dec 14, 2021 1:30:00 PM

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ABLE Act accounts started with a parent. It was Stephen E. Beck, Jr., vice chairman of the National Down Syndrome Society and the Down Syndrome Association of Northern Virginia Board of Directors who proposed a plan to help his daughter, who has Down syndrome, save money. His plan is what became the basis for the Achieving a Better Life Experience (ABLE) Act.

In 2014, the ABLE Act was signed into law by President Obama and in June 2016, ABLE programs were launched in Ohio, Tennessee and Nebraska. In Ohio, for example, these accounts are called STABLE accounts.  

If you’re a parent raising a child with special needs, you know there are unique circumstances when it comes to managing your family’s finances. In a previous blog post, we outlined eight simple steps for parents to take to establish financial stability for their child. This blog takes a closer and more in-depth look at ABLE Act accounts and answers some frequently asked questions.

By definition, ABLE accounts are investment accounts for eligible individuals with disabilities that allow them to save and invest money while retaining eligibility for public benefits programs (like Medicaid, SSI for example). These accounts share similarities with regular bank accounts, but they function more like 529 college savings accounts.


Who Can Use ABLE Accounts?

Eligibility for these accounts extends to individuals who have a disability that began before the age of 26. There is no minimum age requirement. If an individual also receives SSI and/or SSDI benefits, they’re automatically eligible to create an account. There’s pending legislation to extend the age of eligibility to 46, but as it stands currently, individuals must have had their disability begin before 26. You can read more about that bill here

For one way to check out eligibility, Ohio’s STABLE account has an eligibility tool here

ABLE accounts allow people with disabilities to save up to $100,000 in an account without jeopardizing their eligibility for Supplemental Security Income, Medicaid and other government benefits. More than 82,000 ABLE accounts have been established since the act’s passage according to

Interesting to note for families: Anyone can make contributions to the account: including the beneficiary themselves and their family and friends.


What Are the Benefits of ABLE Accounts?

Perhaps one of the biggest benefits of ABLE accounts is that they do not jeopardize an individual’s ability to still receive necessary benefits from government programs. They also allow the beneficiary to grow their money as an investment, save it however they choose and withdraw from it at any time. While contributions to an ABLE account are not tax-deductible on federal income taxes, investment earnings will remain untaxed as long as money taken from the account is used for "qualified disability expenses." (See more info below.)  

In fact, the, STABLE account website shares the benefits of: 

  • Nationwide enrollment for individuals with disabilities
  • Tax-free savings plan for disability-related expenses
  • Save and invest without losing needs-based benefits

As many families may know, medical expenses for people with disabilities can quickly become a tremendous source of stress. Funds from ABLE accounts can help offset that and can be used for housing, transportation, education and employment expenses, assistive technology, healthcare, financial management and administrative services, and personal support services. It’s worth reiterating, distributions used for these specific expenses are tax-free. (See website on ABLE Accounts for more information.)


How Does an ABLE Account Compare to a Special Needs Trust?

Prior to the establishment of ABLE accounts, individuals with disabilities and families with children who have special needs could set up a special needs trust. Keep in mind, families can establish and fund these trusts, and should consider both. Here are a few key differences: 

  • A person with a disability can hold multiple first-party and third-party special needs trust accounts, whereas they can only have one ABLE account.
  • ABLE accounts have lower startup costs and require a deposit of $0 to $50; special needs trusts may come with attorney fees and possibly court costs, which can be expensive. ABLE accounts are known to be easy to set up.
  • ABLE accounts are subject to an annual gift tax exclusion limit of $15,000,  while special needs trusts have no annual limits. (Note: Under current tax law, $15,000 is the maximum amount that individuals can make as a gift to someone else and not report the gift to the IRS (gift tax exclusion). See the ABLE National Resource Center for more information.)
  • Qualified expenses for a special needs trust are determined by the trustee; qualified expenses for an ABLE account are determined by government entities.
  • In order for a person with a disability to be eligible for an ABLE account, they must have had their disability begin before age 26. A person must have had their disability established before age 65 to be eligible for a first-party special needs trust, and there are no age limitations for a third-party special needs trust.


How Do I Establish an ABLE Account?

For individuals with a disability, an ABLE account can help them regain control and independence with their finances. It may make living a quality life easier and more stable. Opening an ABLE Act account such as Ohio’s STABLE account is easy and can be done online here:

Questions about special needs trusts should be reviewed with an attorney or a special needs attorney. We are happy to share our network of resources. A STABLE account can be one component of a complete financial plan.


Disclosure: The information provided is for general educational purposes only and should not be considered legal, tax or investment advice. The information has been obtained from sources believed to be accurate as of the date of original publication of this article, but Carnegie does not guarantee the accuracy of information obtained from third parties.


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Topics: Financial Planning

Carnegie Investment Counsel

Written by Carnegie Investment Counsel

Carnegie Investment Counsel is an Registered Investment Adviser (RIA) providing personalized financial guidance to help you preserve and grow your wealth, so you are freer to enjoy your life. As your fiduciary, we are obligated to place your investing success ahead of our returns.

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