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Exploring ABLE Accounts

Banner image with blue and yellow designs. The title of the blog is "ABLE Accounts: what are they, and how do they work?"

ABLE accounts, also known as Achieving a Better Life Experience accounts, are a relatively new financial tool that can benefit people with intellectual and developmental disabilities (I/DD). These accounts were created to provide a tax-advantaged savings option for people with disabilities. They can be used to pay for a wide range of expenses related to their disability without jeopardizing eligibility for government benefits.

In this post, we’ll review what ABLE accounts are, how they work, and the benefits they offer to people with disabilities.

What is an ABLE account?

An ABLE account is a tax-advantaged savings account that allows people with disabilities to save money without losing eligibility for certain government benefits, such as Supplemental Security Income (SSI) and Medicaid. These accounts were created as part of the Achieving a Better Life Experience (ABLE) Act, which was signed into law by President Obama in 2014.

How does an ABLE account work?

An ABLE account works much like a regular savings account. Contributions are made with after-tax dollars, and any earnings on the account are tax-free as long as the funds are used for qualified disability expenses (QDEs). QDEs include a wide range of expenses related to the person’s disability, such as education, housing, transportation, and assistive technology.

Each state is responsible for setting up and administering its own ABLE program, so the details may vary depending on where you live. However, in general, anyone with a disability that occurred before age 26 can open an ABLE account, and anyone can contribute to the account on behalf of the account holder. The account holder can also manage their account or designate someone else as the account manager.

What are the benefits of an ABLE account?

One of the main benefits of an ABLE account is that it allows people with disabilities to save money without losing eligibility for government benefits. This is because the funds in the account are not counted as assets to determine eligibility for SSI or Medicaid.

Another benefit of an ABLE account is that it can help people with I/DD achieve greater financial independence. By providing a tax-advantaged savings option, an ABLE account can help people with disabilities save money for things like education, housing, and transportation, which can help them achieve greater independence and improve their quality of life.

Finally, an ABLE account can provide peace of mind for families and caregivers. Knowing that there is a dedicated savings account for disability-related expenses can help alleviate some of the financial pressure and uncertainty that often comes with caring for a person with disabilities.

In conclusion, ABLE accounts are a valuable financial tool that can help people with disabilities achieve greater financial independence, improve their quality of life, and provide peace of mind for their families and caregivers. If you or someone you know has a disability, it may be worth considering an ABLE account as part of your financial planning.