Achieving a Better Life Experience (ABLE) account is a tax-free account that can be used for expenses related to disability without losing eligibility for government benefits.

ABLE accounts can be created by eligible individuals to support themselves, by family members to support their dependents, or by guardians for the benefit of the individuals for whom they’re responsible.

Eligible individuals must be blind or disabled — and must have become so before turning age 26. They also must be entitled to benefits under the Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) programs. Alternatively, an individual can become eligible if a disability certificate is filed with the IRS for him or her.

Here are some other key factors of ABLE accounts:

• Distributions from an ABLE account are tax-free if used to pay for expenses that maintain or improve the beneficiary’s health, independence, or quality of life. These expenses include education; housing; transportation; employment support; health and wellness costs; assistive technology; personal support services; and other IRS-approved expenses.
• Anyone can contribute to an ABLE account. While contributions aren’t tax-deductible, the funds in the account are invested and grow free of tax.
• If distributions are used for nonqualified expenses, the portion of the distribution that represents earnings on the account is subject to income tax plus a 10% penalty.
• An eligible individual can have only one ABLE account. Contributions up to the annual gift-tax exclusion amount, currently $15,000, may be made to an ABLE account each year for the benefit of an eligible person. Starting in 2018, if the beneficiary works, the beneficiary can also contribute part, or all, of their income to their account. (This additional contribution is limited to the poverty-line amount for a one-person household.)
• There’s also a limit on the total account balance. This limit, which varies from state to state, is equal to the limit imposed by that state on qualified tuition (Section 529) plans.
• ABLE accounts have no impact on an individual’s Medicaid eligibility. However, ABLE account balances in excess of $100,000 are counted toward the SSI program’s $2,000 individual resource limit. Thus, an individual’s SSI benefits are suspended, but not terminated, when his or her ABLE account balance exceeds $102,000 (assuming the individual has no other assets). In addition, distributions from an ABLE account to pay housing expenses count toward the SSI income limit.
• For contributions made before 2026, the designated beneficiary can claim the saver’s credit for contributions made to his or her ABLE account.

We can help with the options.

ABLE accounts are opened under state programs and an account may be established under any state’s program (if the state allows out-of-state participants). The funds contributed to an account can be invested in a variety of options and the account’s investments can be changed up to twice a year. Contact your local Blue & Co., LLC advisor if you would like more details about setting up or maintaining an ABLE account.