ABLE Account

The account belongs to the person with the disability, called the designated beneficiary, and each person can have only one. A parent, guardian or other authorized person can open and manage it on their behalf. Since 2015 you can use any state’s program, not just your own.

Anyone can contribute, but only in cash, and there is no federal deduction for doing so. The money is invested in the program’s options, and the investment mix can be changed only twice a year. Growth is never taxed as long as withdrawals pay qualified disability expenses. That term is broad: education, housing, transportation, employment training and support, assistive technology, personal support services, health, prevention and wellness, financial management, legal fees, and funeral and burial costs. The expense must relate to the disability and benefit the owner, and IRS rules include anything that helps maintain or improve the owner’s health, independence or quality of life. SSA’s rules even count food as a basic living expense.

A withdrawal for anything else makes the earnings portion taxable, plus a 10% additional tax. Like a 529 plan, the account can be passed without tax to a new owner in the family, here a brother, sister or step-sibling who is also eligible.

Eligibility turns on when the disability began, not on the person’s current age. From January 1, 2026, the disability or blindness must have started before age 46, up from 26 under the original law, a change made by the SECURE 2.0 Act. A 58-year-old whose disability began at 40 can now open an account.

There are two routes in. The automatic one is receiving SSI, or Social Security disability, childhood disability or disabled widow’s or widower’s benefits, based on a disability that began before 46. The other is a disability certification: a signed statement that the person is blind, or has a physical or mental impairment causing marked and severe functional limitations that has lasted or is expected to last at least 12 months or to result in death, with onset before 46. The person must hold a copy of a physician’s signed diagnosis. Conditions on SSA’s Compassionate Allowances list are treated as meeting the standard when they began before 46.

A certification only opens the account. It doesn’t establish eligibility for Social Security disability or SSI, which have their own tests.

The base limit counts deposits from every source together: the owner, family, friends, a special needs trust and rollovers from a 529 plan. For 2026 it is $20,000. It used to equal the $19,000 gift tax exclusion, but the One Big Beautiful Bill Act changed its inflation formula, so the two figures now differ.

An owner who works can add more through ABLE to Work, which the same law made permanent. The extra is the lesser of the owner’s pay for the year or the prior year’s federal poverty line for one person, which gives a 2026 cap of $15,650 in the 48 contiguous states, $19,550 in Alaska and $17,990 in Hawaii. It is available only in a year when nothing is contributed to a 401(k)-type, 403(b) or 457(b) plan for the owner, and the owner must keep records to show it.

This is why ABLE accounts exist. SSI allows only $2,000 of countable resources for an individual, so ordinary savings can cost a person their monthly check. An ABLE account changes that: the first $100,000 is ignored for SSI, and the whole balance is ignored for most other federal means-tested programs, including Medicaid. It isn’t counted as an asset on the FAFSA either.

If the balance goes above $100,000 and the excess pushes the owner over the SSI resource limit, SSI cash payments are suspended rather than ended, and the owner keeps Medicaid eligibility in states that tie it to SSI. Payments resume once the balance falls back.

Withdrawals need a little timing care. A distribution is never counted as income. Money taken out for a qualified expense other than housing stays excluded even if it sits in a bank account for a while, as long as it remains identifiable and you still intend to spend it that way. Money taken out for housing, which means rent, a mortgage, property taxes, heating fuel, gas, electricity, water, sewer and garbage removal, or for a non-qualified purpose, counts as a resource if you still hold it at the start of the next month.

An ABLE account is cheap to open and lets the owner control their own money, but it has a yearly cap and a Medicaid claim at death. A third-party special needs trust, a type of Trust funded with family money and run by a trustee, has no yearly cap and no Medicaid payback, but it costs more to set up and the beneficiary can’t direct it. Many families use both: the trust holds larger sums or an inheritance and feeds the ABLE account up to its limit for day-to-day spending.

A custodial account is a poor fit for a child who receives or may need SSI. SSA ignores the account while the child is a minor, but the entire balance counts as the young adult’s income, then a resource, once the custodianship ends under state law, which can push them over the $2,000 limit overnight. Before then, the custodian may be able to spend the money for the child’s benefit, including by contributing it to the child’s ABLE account within the annual limit.

After outstanding qualified expenses, including funeral and burial costs, are paid, the state can file a claim against the account for Medicaid it paid for the owner after the account was opened, minus any premiums the owner paid into a Medicaid buy-in program. The state is a creditor, not a beneficiary, and the 10% additional tax doesn’t apply to that payment or to a payout after death. Whatever remains goes to the successor or estate under the program’s rules.

For estate planning, that claim is the main reason families often leave larger bequests to a special needs trust and keep the ABLE account for money the owner will spend during life.