The Stephen Beck, Jr. Achieving a Better Life Experience (ABLE) Act is legislation intended to help those with qualifying disabilities to create tax-free savings and investment accounts.
The ABLE National Service Center official site says these accounts aren’t simply to grow a nest egg. Whether you are military or civilian, disabilities can bring more expenses and payments. ABLE accounts are described as “tax-advantaged savings accounts” intended to help pay for the expenses related to having certain kinds of disabilities.
About The ABLE Act
The ABLE Act passed in 2014. President Barack Obama signed legislation known as the Tax Extenders package, and the Act was part of that legislation.
It amends a portion of the IRS code to allow the creation of tax-free savings accounts for those with qualifying disabilities. It is very important to note that this act does not require military service, but does require the applicant to have a qualifying disability.
The original ABLE Act required that account holders must open an ABLE account in the state where they live. The problem with this rule is that not all states have institutions that participate in ABLE.
But in 2015 the law was modified to eliminate this requirement meaning you can enroll in the ABLE program offered by ANY state. The caveat is that the program must be willing to accept an out-of-state account holder.
ABLE Accounts: What You Need To Know
The first ABLE program began in 2016, and since then participants have saved well over $500 million, and some sources report that at least $100 million of that amount was spent on disability-related costs. In reports from 2020, we learn that more than 7,500 accounts are active with some $6,000 saved each.
However, it’s not clear how well promoted these accounts are, as some sources report that less than one percent of all those eligible to participate actually take the time to open these accounts.
What can these tax-free savings accounts be used for? They may pay for “qualified disability-related expenses” including the following:
One of the goals of this act is to permit these savings accounts to accrue money but not at the expense of other benefits. Money deposited into these accounts is not counted against the recipient of public benefits such as Medicaid. However, the money saved in these accounts cannot replace benefits that are offered through private insurance plans.
ABLE Contribution Limits
The total annual contribution cap for each tax year is $15,000. However, this amount is always subject to change and may be revised to account for inflation or other factors. Some qualifying contributors may be permitted to add an additional amount of money depending on circumstances.
Setting Up ABLE
The official site of the ABLE National Resource Center says the following criteria must be met to qualify for ABLE:
- Applicant has a disability with onset prior to their 26th birthday AND
- Applicant meets a severity of disability requirement
What is the ABLE disability Requirement? You qualify by either receiving SSI or SSDI (Social Security Disability Insurance) or obtaining a disability certification which describes how the disability meets the “marked and severe” functional limitations listed in ABLE regulations.
When it comes to qualifying conditions, there are too many to list here but in general a condition qualifies when it results in “marked and severe functional limitations will qualify an individual to open an ABLE account so long as the disability began before the age of 26.”
The condition may be physical, developmental, or mental and it’s important to note that the requirement is for the DISABILITY to begin by age 26, not the APPLICATION.
ABLE accounts may be set up by the applicant or by a designated person as follows:
- An agent under a power of attorney
- A conservator or legal guardian
- Representative payee appointed for the eligible individual by the Social Security Administration (SSA)
Approximately 45 different ABLE options are available with savings and investment caps set between $235,000 to $529,000 at press time. You can search for ABLE resources in your state at the official site.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News