Achieving Better Life Experience (ABLE) Accounts

Achieving Better Life Experience Accounts (“ABLE accounts”) are tax advantaged savings accounts relevant to certain persons who receive Supplemental Security Income (“SSI”) and who became blind or disabled before their 26th birthday. Section SI 01130.740 to the SSI’s Program Operations Manual System (“POMS”) provides useful guidance on ABLE accounts.

ABLE account allow beneficiaries (i.e., the account owners) to receive a total of $15,000 a year in funds either as gifts from other persons or from their own earnings. The ABLE account balances do not count as resources for SSI or Medi-Cal eligibility purposes. ABLE accounts can be used to pay a variety of Qualified Disability Expenses (“QDE’s”). Such QDE payments when made do not count as income for continued SSI eligibility purposes.

Perhaps the most relevant QDE’s are Housing, Education, Living, and Transportation expenses. Housing QDE’s include rent, real property taxes, utilities, water, sewer and garbage expenses.

An ABLE account is a good way for family and friends to give money towards Housing and Living expenses without reducing the beneficiary’s SSI benefits. Otherwise, without using an ABLE account, any such assistance would count as so-called In-Kind Support and Maintenance (“ISM”) which reduces the SSI benefits.

Distributions from an ABLE account to pay Housing expenses should be spent – and not retained – in the same month when the distribution occurred. Otherwise, any unspent portion of a QDE distribution intended for Housing expenses will count, for SSI eligibility purposes, as a resource in the following month(s).

Other QDE distributions that are retained, past the month of distribution, to be spent in a future month on a QDE will not count as resources so long as the unspent distribution remains both identifiable and intended for a non-housing related QDE.

If the retained money is ever spent on a Housing related QDE or spent on any non QDE expenses then that money will then be counted as a resource in the the month it was spent. Likewise, if a beneficiary changes his or her intentions, with respect to money distributed and retained, and decides to use the unspent ABLE distributions for a Housing related QDE or for a non-QDE expense, then that money also counts as a resource starting in the same month that the beneficiary changed his or her intention.

The usefulness of an ABLE account is limited by the fact that it can only receive $15,000 in total contributions in any one year and cannot hold more than $100,000 in deposits. Therefore, ABLE accounts are usually not sufficient by themselves to replace Special Needs Trusts (“SNT’s”). SNT’s are typically funded by inheritances that usually exceed both these limits.

However, ABLE accounts can be a very effective supplement to a SNT. If allowed under the terms of the beneficiary’s SNT, the Trustee of an SNT can make contributions to the ABLE account that the beneficiary can use to pay for QDE’s, particularly Housing related QDE’s. In addition, unlike earnings inside a SNT, the income earned by the ABLE account is income tax free.

Lastly, if a beneficiary of an ABLE account is unable to manage the account himself or herself then the ABLE account can be managed by someone else on the beneficiary’s behalf. Implementation of California’s own ABLE program is still delayed. That, however, does not stop California residents from opening an ABLE account in another state with an ABLE program.