ABLE Accounts

Imagine that your child with special needs receives an unexpected small inheritance, or receives a nominal settlement from a personal injury lawsuit, but is unable to deposit it into his bank account because he is limited on how much money can be in the account. Consider also the scenario where your child is a beneficiary of a custodial UTMA account or 529 college savings plan, but is unlikely to attend college. What can you do with these funds?

Traditionally, a trust would have been a common special needs planning tool utilized to protect these funds. At times, though, the cost of establishing and maintaining a trust for nominal sums of money are burdensome. Moreover, a trust gives a capable child with a disability neither the ability to manage the trust assets for his benefit, nor the ability to withdraw funds from the trust at his own discretion. Now, a new special needs planning option is available to your child: an ABLE account.

What It Is

The Achieving a Better Life Experience (ABLE) program became effective in New York State on April 1, 2016 and enrollment became available in early fall 2017. The purpose of the ABLE program is to enhance the independence and quality of life of individuals with disabilities by creating accounts in which they can save funds to pay for disability related expenses without impacting eligibility for means-tested government programs such as Supplemental Security Income (SSI) and Medicaid. Your child qualifies as an “eligible individual” to open an ABLE account if he has a significant disability and the onset of that disability occurred before age 26. If your child currently receives Supplemental Security Income and/or Social Security Disability Insurance (SSDI) because of his disability, this alone is sufficient to prove disability. Alternatively, if your child does not receive such benefits, he may still be eligible if he can provide certification from a licensed physician and the disability is included in the Social Security Administration’s List of Compassionate Allowances Conditions.

Your child can create and manage an ABLE account for himself provided that he has capacity. Alternatively, as his parent, legal guardian, or agent under a power of attorney, you can create an ABLE account on your child’s behalf. Coordination with your child and family members is critical because only one ABLE account is permitted per child. Your child is both the ABLE account owner and the designated beneficiary, even if you established the ABLE account on his behalf.


Any person, including your child, family member or friend may contribute to your child’s ABLE account. Contributions must be made in cash. The annual contribution cap per ABLE account is limited to the annual federal gift tax exclusion, which is currently $15,000 per year. This means that if your child contributes $5,000 of his own money to the ABLE account and you also wish to contribute to the ABLE account, you can only contribute an additional $10,000 during the calendar year.

Contributions are not income tax deductible to the person making a contribution to an ABLE account. However, the growth in the ABLE account is not taxed, provided that distributions are made for qualified disability expenses. Contributions do qualify for the federal annual gift tax exclusion. Once the ABLE account reaches the state’s 529 education savings account maximum, contributions can no longer be made to the ABLE account. However, if your child enrolls in a New York ABLE program, the maximum account balance cannot exceed $100,000. If your child receives SSI, an ABLE account balance in excess of $100,000 is considered “resources” under SSI rules, regardless of the state in which the child is enrolled. This can result in a loss of SSI benefits until the ABLE account drops below $100,000. Each state’s ABLE program designates their own investment options and most ABLE programs are open to residents from other states. Changes to investment options may be made twice annually and, just like stocks, investment options range from conservative to aggressive. A checking account and debit card are also offered.


Your child is limited to using his ABLE account for qualified disability expenses. This means that the funds in the ABLE account can be used for any expense related to your child’s disability that assists him in increasing or maintaining his health, independence and/or quality of life. Qualified disability expenses include housing, education, transportation, employment training and support, assistive technology and related services, health (prevention and wellness), financial management and administrative services, legal fees, expenses for ABLE account oversight and management, funeral and burial expenses and basic living expenses.

Upon your child’s death, any amount remaining in the ABLE account is subject to Medicaid payback for payments made by Medicaid on your child’s behalf after the date of establishment of the ABLE account.

Under the recent tax act passed in Congress, families who have set aside money in a 529 college savings account can roll over up to $15,000 each year into an ABLE account. Also, if a beneficiary of an ABLE account has income from employment and does not participate in an employer’s retirement plan, the beneficiary can now make contributions to the ABLE account above the $15,000 limit from his own income up to the Federal poverty level, which is currently $12,060 for a single individual.


An ABLE account may be advantageous for your child as it can promote self-sufficiency and control. The funds in the ABLE account are not taken into consideration when determining eligibility for means-tested federally funded benefits such as SSI and Medicaid.

ABLE accounts are another “tool” in the special needs planning toolbox. They are not a substitute for proper estate planning, including a third party supplemental needs trust, as the ABLE account has limits on how much money can be in the account and is subject to payback to Medicaid upon your child’s passing.

Special needs planning is complex and planning is often individual to each family’s unique circumstances. It is important for you to work with experienced professionals to consider all planning options available for your child.

Amy C. O’Hara is a partner with the White Plains law firm of Littman Krooks and focuses her practice on special needs planning, guardianship, benefits advocacy, elder law and estate planning. Amy is certified as an Elder Law Attorney by the National Elder Law Foundation. She is also a member of the Special Needs Alliance, a national, not-for-profit organization dedicated to assisting families with special needs planning. For more information visit littmankrooks.com.