The ABLE account is a state-run savings program for eligible people with disabilities in the United States. It continues to be an area many families have questions about, in terms of its set up and how to effectively use it. We have compiled multiple questions over the years regarding these accounts and we feel our answers will help many families with their understanding. Before we answer those detailed questions, let’s remind ourselves about the ABLE account:
The ABLE account is an account in which an individual with a disability can accrue resources in excess of $2,000 and still qualify for financially based government support such as Supplemental Security Income (SSI), which is a monthly income stream, and Medicaid. These benefits can provide services that allow individuals with a diagnosis to live in the community in the most independent situation possible based upon their ability level. However, in order to access these services, an individual can have no more than $2,000 in accounts such as checking, savings, and investment accounts. The only exceptions to this rule are if money accrues within an ABLE account or a Special Needs Trust.
Answering Your Questions
1. Can we transfer stocks into ABLE accounts?
No. ABLE accounts are set up by each individual state and each ABLE plan will have its own set of investments that must be used.
2. If we setup these accounts, can we max out the amount at setup or does it have to be deposited in $15K increments/year?
Each state ABLE account will have a maximum amount of money that can be contributed over the lifetime of the account; however, you are limited by the annual contribution limit. The maximum annual contribution limit for 2020 is $15,000 per year, which means you can slowly grow this account, and cannot “max out” the contribution at set up. More than likely, you will not want to contribute the maximum allowable amount because one of the rules within an ABLE account is that once the value reaches $100,000, Supplemental Security Income (SSI) will be suspended.
3. Are these accounts specific to the state of residence? What if our child with special needs moves to another state?
The ABLE account is state specific; however, you do have the flexibility to choose any state’s plan. You or your child do not have be a resident of the state to use that state’s ABLE account. Your child can move from state to state and continue to keep the same ABLE account. There is no rule that he/she will have to transfer the money from one state to another if he/she moves.
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4. Where are these accounts housed?
ABLE accounts are held directly with the state that sponsors the ABLE account you choose to use. For the most part, you must open the ABLE account through the specific website of the state in which you choose. It is not an account that is housed at your local bank, like a checking or savings account.
5. Who authorizes expenditures from the ABLE account?
It all depends on the age of your child. If your child is a minor, then as the parent you will make all decisions regarding the money within the account. If your child is an adult and is his/her own guardian, then he/she controls all decisions regarding the account. If you, as the parent, is the guardian of the person (of your adult child), then you can become an Authorized Individual on the account which would provide you a level of control over the money.
6. Is there a fee for someone administering these accounts?
The ABLE account, for the most part, is a do-it-yourself type of account. Each state will charge an annual fee on their account. Some states will have a different fee for residents and non-residents, so please research the fee before choosing which ABLE you will use.
These are only six questions of many we could discuss, but they seem to be the most repeated questions we hear. Please feel free to visit the resources page of www.aspecialneedsplan.com for more information on ABLE accounts and Special Needs Planning.
This article was featured in Issue 112 – Understanding Diagnosis & Disorders