Debunking ABLE Myths


Myth: An individual has to be on Social Security benefits to qualify for having an ABLE account.

Fact: The final version of the ABLE Act limits eligibility to individuals with significant disabilities with an age of onset of disability before turning 26 years of age. If you meet this criteria and have also been found eligible to receive benefits through SSI and/or SSDI programs, you are automatically eligible to establish an ABLE account. If you are not a recipient of SSI and/or SSDI, but still meet the age of onset disability requirement, you could still be eligible to open an ABLE account if you meet Social Security’s definition and criteria regarding significant functional limitations and receive a letter of certification from a licensed physician. 

Myth: An individual must be under the age of 26 in order to have an ABLE account.

Actual: An individual need not be under the age of 26 to be eligible for an ABLE account. You could be over the age of 26, but must have had an age of onset before the individual’s 26 birthday. 

Myth: The only individual who can deposit money into the ABLE account is the qualified beneficuary.

Actual: Any individual, such as a family member, friend, or the person with a disability, may contribute to an ABLE account for the purposes of qualified disability expenses and for the benefit of the qualified beneficiary.

Myth: An unlimited amount of money can be deposited into an ABLE account.

Actual: The total annual contribution by all participating individuals (contributors), including family, friends, and the person with a disability, for any given tax year is currently $14,000. The amount may be adjusted periodically for inflation. Under current tax law, $14,000 is the maximum amount that individuals can make as a gift to someone else and not pay taxes (gift tax exclusion). The total aggregate account limit over time is subject to the individual state and their specific limit for education-related 529 savings accounts. Many states have set this limit at more than $300,000 per account. However, it is worth noting that for individuals with disabilities who are recipients of SSI, the ABLE Act sets some further limitations (see below).

Myth: Once my ABLE account exceeds $2000 I lose my eligibility for SSI benefits and Medicaid.

Actual: The first $100,000 in ABLE accounts would be exempted from the SSI $2,000 individual resource limit. If and when an ABLE account exceeds $100,000, if the beneficiary is receiving the SSI cash benefit, his/her cash benefit related to SSI would be put in a state of suspension until such time that the account balance falls back below $100,000. However, this would have no additional effect on the beneficiary’s eligibility for any other federally funded means tested benefit such as Medicaid.

Myth: If I have a special needs trust or participate in a pooled income trust, there is no need or benefit of me setting up an ABLE account.

Actual: While the different tools used for financial planning can be different from one beneficiary to another, ABLE accounts do offer different types of options that may not be as accessible with other types of trusts and savings accounts. An ABLE Account may provide more choice and control for the beneficiary and family then other types of trusts and accounts. Cost of establishing an account will likely be considerably less than either a Special Needs Trust (SNT) or Pooled Income Trust. With an ABLE account, account owners will have the ability to control their funds and, if circumstances change, still have other options available to them. Determining which option is the most appropriate will depend upon individual circumstances. For many families, the ABLE account will be a significant and viable option in addition to, rather than instead of, a Trust program.

Myth: If my state does not have an ABLE program, there is no opportunity for me to participate in the program.

Actual: No.  While the original law passed in 2014 did stipulate that an individual had to open an account in their state of residency, this provision was eliminated by Congress in 2015.  This means that regardless of where you might live and whether or not your state has decided to establish an ABLE program, you are free to enroll in any state’s program provided that the program is accepting out of state residents.

To determine which state ABLE programs are accepting out of state programs, please refer to the individual state pages.  Examples of state ABLE programs accepting enrollment nationwide include: Ohio, Nebraska, and Tennessee.  An example of a state ABLE program only accepting in-state residents would include the Florida ABLE United program.

Myth: In all circumstances the account must pay Medicaid the remaining balance upon the death of the beneficiary.

Actual: In all likelihood funds remaining in the account upon the beneficiary’s death will be used to reimburse the state for Medicaid related services. The amount of any Medicaid payback is calculated based on amounts paid by Medicaid after the creation of the ABLE Account and excludes amounts paid by the beneficiary as premiums to a Medicaid buy-in program.

Myth: An individual has to visit or contact a bank in order to set up an ABLE account.

Actual: ABLE programs are developed and managed on the state level, therefore the managing state has the flexibility to determine the process in which a person enrolls.  Thus far, in an effort to keep administrative costs low and to ensure an affordable program for the beneficiary, enrollment (and maintenance of the account) is primarily done through the individual state ABLE program website/online portal.  However, some states also offer the option to enroll via mail or fax.