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ABLE Accounts

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ABLE Accounts

The Achieving a Better Life Experience (ABLE) Act, passed by Congress on December 19, 2014, was approved by the Virginia General Assembly in 2015. An ABLE account allows tax-deferred savings for people who become disabled prior to age 26. Funds in the account can be used for disability-related expenses of the account’s designated beneficiary. In Virginia, the ABLE program is operated by the Virginia 529 program under the name “ABLEnow”. The program is at www.able-now.com.

Eligibility: To be eligible to be the designated beneficiary/account owner of an ABLE account, a person must be a U.S. C citizen or legal resident and be:

  • Eligible for Supplemental Security Income (SSI) base on disability or blindness that began before age 26; or
  • Entitled to disability insurance benefits, childhood disability benefits or disabled widow’s or widower’s benefits based on disability or blindness that began before age 26; or
  • Someone who has certified, or whose parent or guardian has certified, that he or she:
  • Has a medically determinable impairment meeting certain statutorily specified criteria; or is blind; and,
  • The disability or blindness occurred before age 26.

Benefits: An eligible individual can be the beneficiary of only one ABLE account. Contributions to the ABLE account from all sources, other than earnings from the beneficiary’s employment, are limited to $15,000 per year. Funds in the ABLE account grow tax-free. Funds in the account are disregarded in determining resource eligibility for Medicaid, SSI, and other federal needs-based programs. For purposes of determining eligibility for SSI, money in an ABLE account in excess of $100,000 is considered an asset to the individual with a disability and may cause SSI benefits to be reduced. An account balance of up to $100,000 is disregarded. There is no impact on Medicaid benefits regardless of how much money is in the ABLE account. Distributions from an ABLE account that are spent on “qualified disability expenses” do not affect Medicaid eligibility. Payment of housing expenses will not affect SSI eligibility provided that the money withdrawn from the ABLE account is used for housing expenses within the month it was withdrawn.

Tax Details: Contributions to an ABLE account are not tax-deductible for federal income tax purposes. However, Virginia offers an annual state income tax deduction of up to $2,000 per contributor for contributions to an ABLEnow account. Earnings on funds in the account and distributions from the account are not subject to federal or state income taxes.

Withdrawals from ABLE accounts: The funds in the account can be used for “qualified disability expenses” which are expenses related to the eligible person’s disability or blindness and helps the person to maintain or improve their health, independence or quality of life. Examples of qualified expenses are education, housing, transportation, health, legal fees, basic living expenses, financial management, and administrative services, funeral and burial and assistive technology.

Payback Provisions: When the beneficiary of an ABLE account dies, the State of Virginia can seek to recover funds remaining in the account., after payment of any outstanding qualified disability expenses, to reimburse the State for Medicaid benefits that the designated beneficiary received. For this reason, ABLE accounts may not be the best strategy for family members to give money to a relative with disabilities. Special needs trusts funded by family members do not disrupt SSI or Medicaid benefits and do not require reimbursement to the state upon the beneficiary’s death. ABLE accounts are a useful way for individuals with disabilities to save their own money without losing benefits.

Find out how an ABLE account can fit into your planning for a disabled loved one. Attorneys Jean Galloway Ball and Loretta Morris Williams can assist your family with special needs planning. Both are certified in elder law by the National Elder Law Foundation, are members of the Academy of Special Needs Planners, are AV rated by Martindate-Hubbell, and are listed in SuperLawyers for Virginia.

Since 1980 the AV-rated law firm of Hale Ball has served the legal needs of individuals and businesses. Our team of attorneys include lawyers named to Super Lawyer and Rising Star lists, as well as attorneys with advanced legal degrees, specialty certifications and lawyers who teach their areas of practice to other lawyers.

Use the contact form on this page to schedule a consultation, or call 703-591-4900.

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