An ABLE (Achieving a Better Life Experience) account is a must-have savings tool for persons with special needs. It supplements but does not replace needed public benefits while often providing greater flexibility than available under a supplemental needs trust.

The maximum amount that can be contributed each year to an ABLE account for a person with disabilities rose $1,000 to $17,000 on January 1, 2023.  That figure is tied to the inflation-adjusted value of the IRS’s gift tax annual exclusion. Pennsylvania and 45 other states offer ABLE programs.

Congress passed the Achieving a Better Life Experience (ABLE) Act in 2014, amending the Internal Revenue Code to allow families to create new tax savings plans, modeled after the popular 529 savings plans for higher education, that allow money to be set aside for or a person with special needs to pay for disability related expenses. This money can grow tax-free over time and is used to pay for qualifying expenses toward the care and support of the special needs beneficiary.

These accounts are administered by the individual states and accept contributions in the form of cash only (not bonds, securities, real estate, or other assets).  A major benefit of ABLE accounts is that the beneficiary can manage and control them once he or she comes of age.

People with disabilities who are employed can save even more beyond the $17,000 limit in an ABLE account, up to the federal poverty level for a single individual. This means that those in the lower 48 states can invest an additional $14,580 this year.

However, the total amount that can be held in an ABLE account without jeopardizing government benefits like Supplemental Security Income (SSI) remains at $100,000. For individuals who are not receiving such means-tested benefits, such as recipients of Social Security Disability Benefits (SSDI), the maximum account limit is tied to the account limit for the particular state’s 529 programs, which in 2023 can range from $300,000 to $517,000. A Pennsylvania ABLE account can hold up to $511,178. Contributions to such an account qualify for a Pennsylvania Income Tax deduction. For more information Pennsylvania ABLE accounts click here.

For an introduction to ABLE, click here.

For an article comparing ABLE accounts with special needs trusts, click here.

ABLE accounts are no substitute for properly drafted Supplemental Needs Trusts. But they can be a helpful supplement which enhances the well-being of incapacitated loved ones. The attorneys at Vasiliadis Pappas Associates have helped many families with special needs planning. If you have an incapacitated loved one, call us. We can help.

Contact Vasiliadis Pappas Associates for assistance if you or a loved one encounters this situation.