Understanding ABLE Accounts

Comprehensive estate planning can be an extensive process, especially if you have many different assets. However, there are also other important considerations when it comes to an effective estate plan, including family members with disabilities. For a long time, special needs trusts were the vehicle of choice in ensuring that a family member with special needs can continue to receive care even after a caretaker passes away. In the last few years, a new option has become available: an ABLE account.

The Basics

ABLE accounts were created by the Achieving a Better Life Experience Act of 2014. While anyone can establish a special needs trusts, only individuals who reside in states that permit ABLE accounts or whose state has contracted with another state to offer such accounts are eligible. New York has an ABLE account program in place, and utilizing it may help you better address your family’s needs.

Qualifying beneficiaries must have become disabled prior to the age of 26. Family members caring for such individuals are allowed to make annual contributions to an ABLE account up to the annual gift tax exemption limit, which is currently fixed at $14,000. Unlike a special needs trust, the money you invest in such an account will continue to gain tax-free interest while it remains in the account. Additionally, contributions to the account are not deductible but withdrawing funds from the account can be done without a tax penalty as long as the withdrawal is being used for a qualifying expense related to the disability.

Generally, these accounts do not affect an individual’s ability to receive disability benefits from the government. However, if the account reaches $100,000 then disability benefits may be suspended until the account dips below that amount. It is also important to remember that while the money in an ABLE account is not generally counted as an asset of the disabled individual for disability benefits purposes, using the money in the account for housing-related costs could result in that amount being counted as an asset of the disabled individual.


With a special needs trust, the funds in it can be used to pay for pretty much anything the government does not pay for. ABLE accounts can only be used to pay for qualifying expenses. That does not include things like travel, recreation, entertainment, or hobbies. As such, ABLE accounts can be a bit more restrictive.

Contributions in excess of the yearly maximum allowable limit of $14,000 could result in gift tax liability. When a disabled individual benefitting from an ABLE account or a special needs trust dies, any money remaining in either type of account must be used to pay the government back for any expenses incurred after the account was created. An experienced estate planning attorney can help you weigh the pros and cons of different estate planning approaches for individuals with special needs.

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