Achieving Better Life Experience (ABLE) Accounts

Many blind or disabled persons receive needs based government benefits — like SSI and Medi-Cal — whose stringent income and resource limitations prevent families from gifting much needed money directly. Persons wishing to assist them often establish Special Needs Trust or Pooled Special Needs Trusts.

Now ABLE accounts help some blind and disabled persons to receive, accumulate and later spend some money without losing needs based benefits.

Only persons who were eligible to receive SSI based on a disability or blindness before age 26 are eligible for a state sponsored ABLE account. Unfortunately many other persons on SSI and Medi-Cal are ineligible.

Eligible persons can have only one ABLE account at any state sponsored ABLE financial institution; the account can be opened by a beneficiary who has the ability to manage the account and otherwise can be opened by a parent, guardian, conservator or the beneficiary’s own agent under a power of attorney; the account can receive up to $14,000 per year total contributions from all sources; the account can accumulate up to $100,000 on deposit without affecting SSI; and the ABLE account can be used to pay for Qualified Disability Expenses, including, education, housing, transportation, and basic living expenses, amongst others.

Whatever remains on deposit when the beneficiary dies are subject to Medi-Cal estate recovery related to medical expenses incurred after the ABLE account was established, but not before like with a Special Needs Trust.

Due to its limitations ABLE accounts do not typically replace Special Needs Trusts. But, see below, ABLE accounts nicely complement a Special Needs Trust.

Unlike Special Needs Trusts, ABLE accounts are not taxed on earnings.

Perhaps the best use of an ABLE account is to contribute towards housing related expenses on a recurring basis without reducing SSI benefits. Provided the ABLE account distribution is spent in the same month towards housing expenses the distribution into the beneficiary’s checking account prior to paying the expense will not be count as an available resource.

Assistance with rent — In Kind Support and Maintenance — received by an S SI beneficiary reduces S SI benefits in the month of receipt up to a Presumed Maximum Value of around $265. Accordingly, any rent assistance — even from a Special Needs Trust — should first be contributed into an ABLE account for distribution to the beneficiary to pay the rent in the same month he or she receives the money. Otherwise, if the beneficiary holds on to the rent assistance received from the ABLE account and pays the rent in the next month the result is a reduction in SSI benefits for that next month.

With other ABLE distributions to the beneficiary that are made with the intent to pay for Qualified Disability Expenses, the disabled person can hold on to the money — provided it is identifiable — into later months without it being counted as an available resource. When the money is spent on a Qualified Disability Expense — such as education, transportation, or legal fees — it is a conversion of an exempt resource into another exempt resource.
A distribution from an ABLE account is not income but is a conversion of a resource from one form to another. If, however, any of the money is later used for a Non Qualified Disability Expense, like gambling, that money will count as an available non exempt resource in the month spent and reduces SSI benefits.

A beneficiary who becomes unable to proceed with the intended purchase of a Qualified Disability Expense should either return the money back to the ABLE account or redirect it to another Qualified Disability Expense.
California does not now sponsor any ABLE accounts, but may by the Fall. For other details associated with ABLE accounts for answers to specific questions consult with a qualified legal or financial advisor.