Understanding ABLE Accounts: A Guide for Families and Caregivers
The Achieving a Better Life Experience (ABLE) accounts have become a vital financial resource for individuals with disabilities, providing them an avenue to save without losing access to essential government benefits.
The Need for ABLE Accounts
Many families face the challenge of funding the care and support needed for loved ones with disabilities. ABLE accounts are designed to address this issue, allowing individuals to save money without jeopardizing their eligibility for critical programs like Medicaid and Supplemental Security Income (SSI).
How ABLE Accounts Operate
Established in 2014, ABLE accounts operate similarly to 529 education savings plans but are specifically tailored for those with disabilities. Currently, 46 states and Washington, D.C., offer these accounts, often accessible to non-residents. For instance, the ABLEnow program in Virginia is open to individuals from every state.
One of the key benefits of ABLE accounts is that savings up to $100,000 do not count towards the SSI resource limit. This ensures that individuals can manage their finances while still receiving necessary government support. Moreover, funds contributed to these accounts grow tax-free, provided they are used for qualified expenses such as housing, transportation, or medical needs.
Expanding Accessibility in 2026
Exciting changes are on the horizon for ABLE accounts, particularly with the implementation of the ABLE Age Adjustment Act starting January 1, 2026. This legislation broadens eligibility criteria, increasing the maximum age from 26 to 46. As a result, millions more individuals will be able to access these accounts.
Currently, there are about 8 million qualified individuals, managing approximately $2.5 billion in assets. Expectations are that this number could jump significantly, with projections estimating that 15 million people will become eligible thanks to the adjusted age limit. This change is seen as transformative, granting millions the opportunity to use tax-advantaged accounts for wealth-building purposes similar to those already available to typical families.
Legislative Enhancements for ABLE Accounts
The recent tax and spending package introduced by the previous administration has made several modifications that enhance the appeal of ABLE accounts. The contribution limit for these accounts is periodically aligned with the annual gift tax exclusion, currently set at $19,000 for 2025, with potential increases based on inflation.
Additionally, individuals with severe disabilities may have the option to contribute more than the standard limit if they aren’t benefiting from specific retirement plans. The exact contribution amounts vary by state and depend on individual circumstances.
Converting 529 Plan Assets to ABLE Accounts
One notable change allows the rollover of assets from a 529 college savings plan into an ABLE account. This is particularly advantageous for families with significant savings in a 529 plan that may no longer be needed for their child’s education but can now be used to support disability-related expenses.
This flexibility enables families to reallocate funds effectively, ensuring that the financial resources are used in the most beneficial way for loved ones with disabilities.
Additional Financial Benefits
Low-income savers may qualify for a saver’s credit when contributing to an ABLE account, providing further incentives for families to invest in these accounts. Starting in 2027, the contribution eligible for this credit will increase from $2,000 to $2,100, allowing for a greater tax benefit of up to $1,050.
For families like that of Brandon Dickerson, who requires ongoing therapies such as speech and physical therapy, ABLE accounts serve as a lifeline. With insurance often falling short of covering these crucial services, these accounts allow families to allocate funds for therapies that are not covered, ensuring that individuals receive the support they need for progress.
Conclusion
ABLE accounts represent a critical financial tool for families and caregivers of individuals with disabilities. They provide an effective means of saving and investing without risking the vital benefits necessary for quality care. With upcoming legislative changes and enhancements to these accounts, more families will have the opportunity to secure a brighter financial future for their loved ones with disabilities.
