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Melissa Stuart
BY Melissa Stuart

What You Need To Know About The ABLE Act and Tax Free Savings Accounts

One of the biggest hurdles parents of children with special needs face is preparing for the future.  With income restrictions on many benefit programs, it can be difficult for parents to plan for their child’s future needs.  Recently, however, Congress has introduced legislation called the Achieving a Better Life Experience (ABLE) Act, which would enable parents of special needs children to have a tax-free savings account similar to a college savings account to provide funds for the future care of their children.

What is the ABLE Act?

The ABLE Act was introduced in 2012 and enjoyed wide bipartisan support in both the House and Senate.  Because it was never called for a vote, it was reintroduced in 2013 as H.R. 647 (introduced by Rep. Ander Crenshaw, R-FL) and S. 313 (introduced by Sen. Robert Casey, D-PA).  As of February 15, 2013, the bill was referred to the House Subcommittee on Health and the Senate Subcommittee on Finance.  The authority to create the accounts would be created under a new sub-section of the IRS code governing Qualified Tuition programs (529(f) of the Internal Revenue Code).

How The Able Act Works

Under the ABLE Act, families would be able to set aside funds into a tax-free savings account.  The funds could be withdrawn to cover costs associated with health care, employment, housing, transportation, and education.  The funds would supplement but not replace benefits provided by Medicaid, Social Security, and private insurance and would not jeopardize a child’s eligibility for federal benefit programs.

Ander Crenshaw

U.S. Rep. Ander Crenshaw of Florida is sponsoring the Achieving a Better Life Experience Act, also known as the ABLE Act, that will help people caring for individuals with special needs.

The accounts would allow families to provide for extra costs associated with every day activities and community inclusion.  The accounts would be available in any state, and have the same tax structure of traditional college savings accounts.

The income earned in the account is not taxed and withdrawals for qualified disability expenses are also tax-free.  Contributions to the account, like traditional college savings plans, are considered tax-free gifts for purposes of the IRS.  Thus, while there is no maximum or minimum that can be put in the account, the contribution would only be tax-exempt up to $14,000 each year.  However, each parent is allowed to make a contribution for a total of $28,000 each year, tax-free.  Should the ABLE Act pass, parents are encouraged to contact a tax or financial planning expert for more information.

Lauren Potter of Glee about the ABLE Act

What Expenses Are Allowed Under the ABLE Act?

The ABLE Act allows tax-free withdrawals of funds from the account for qualified disability expenses.  These include:

Health Care, Prevention and Wellness:

  • Premiums for health insurance
  • Mental health, medical, vision, and dental expenses
  • Habilitation and rehabilitation services
  • Durable medical equipment (DME)
  • Therapy
  • Respite care
  • Long-term services and supports
  • Nutritional care
  • Communication services and devices
  • Adaptive equipment
  • Assistive technology
  • Personal assistance

Employment Support:

  • Expenses relating to obtaining and maintaining employment
  • Job-related training
  • Assistive technology
  • Personal assistance supports


  • Rent (primary residence)
  • Home purchase (primary residence)
  • Mortgage payments
  • Home improvements and modifications
  • Home maintenance and repairs
  • Property taxes
  • Utilities


  • Mass transit costs
  • Purchase and/or modification of a vehicle
  • Moving expenses


  • Tuition (preschool through post-secondary education)
  • Books
  • Supplies
  • Tutors
  • Special Education Services

Other Expenses:

  • Financial management
  • Account administration services
  • Legal fees
  • Expenses for oversight or account monitoring
  • Funeral and burial expenses
  • Assistive Technology and Personal support expenses are allowed as they pertain to any of the above categories.

It is possible that this list will change if and when the bill is approved and regulations are developed.

Who Qualifies for an ABLE Account?

Any person receiving SSI or SSDI or any person who has a “medically determined physical or mental impairment, which results in marked and severe functional limitations, and which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months,” or one who is blind.

Persons may need to provide a copy of their diagnosis signed by a physician, or an affidavit (signed statement) from a parent or guardian regarding the child’s diagnosis and functional limitations.

How will the ABLE Account Impact My Child’s Federal Program Benefits?

Those with an ABLE Account will still be eligible to receive Medicaid benefits and SSI.  However, when the amount in an ABLE Account reaches $100,000, any monthly SSI benefits would be placed in suspension.  If the account drops below $100,000, the monthly SSI benefits would resume (meaning the person would not have to re-apply for SSI).

Also, in the event the beneficiary dies or is no longer considered to have a disability and there is money remaining in the account, that money would be given to any State Medicaid plans that provided medical assistance.  The amount of Medicaid payback would be calculated based on amounts paid by Medicaid only after the ABLE Account was created.

What Happens Next?

The bill is currently being reviewed by legislative committees.  Thus, the language and details of the legislation may change.  If the bill gets approved and signed into law, the IRS would then develop regulations to implement and administer the rules governing the accounts.  This process takes time and there is no guarantee that the bill will be passed or that it will look the same as it does as of the time of this publication.  However, parents are encouraged to contact their Representatives and Senators to urge them to support the bill.  To stay up-to-date on the latest happenings with both the Senate and House versions of the bill, please click the links below:

Link to the House Bill:

Link to the Senate Bill:

Melissa Stuart

Written on April 18, 2013 by:

Melissa Stuart is an associate attorney at Cohen & Malad, LLP in Indianapolis, Indiana. She graduated J.D., cum laude from Indiana University School of Law, 2011 and was Editor-in-Chief of the Indiana Health Law Review. Prior to joining Cohen & Malad, LLP, Melissa worked for several years at Riley Children's Hospital in the Christian Sarkine Autism Treatment Center as a Research Specialist.
  • Marcella S

    So appreciative of the thorough information about the ABLE account. There are so many rules, red-tape, agencies, paperwork, therapies, etc. it is hard to keep up-to-date on every aspect that can significantly impact a person of special needs along with their family members.


  • Andrew B.

    Thank you Melissa BUT, regarding the issue of surrendering money to any State Medicaid Plan upon death, why would the ABLE ACT be more advantageous than a Special Needs Trust?

    • Andrew, You raise a good point. Without knowing how the final law and regulations would look if the bill gets approved, it is hard to say at this point. However, I think the intention behind it is to create another option for families of children with special needs. On its face, it would appear to be more flexible (i.e., wouldn’t necessarily require a trustee or fees to set one up or administer the funds). At this point, only time will tell how options like this play out in the real world.

    • Andrew, there will still be a need and place for SNT. However, most are funded @ death with insurance. ABLE allows savings and withdrawls for QE as the account owners need the funds. Also, SNT are expensive and usually not transportable. Surrendering the ABLE accout to satisfy MC is really the only way the bill will get passed. Once passed, as an account holder gets a good chunk in the account, thats really when a SNT is needed to work on concert with ABLE.

  • Thanks Melissa. I personally agree with you that the more tools the better. But it certainly does not replace a proper estate plan with a third-party trust (pooled or not), which does not require a state pay back. A third-party trust can also be simple and cheap to set up with great expert organizations like the Arc of Indiana. So yes, it will be another tool, but maybe not the best tool for many or most families.

    Say ‘hi’ to Vess for me.

  • you can also establish a special needs trust for your child and then at the childs death state that the money goes to the remaining sibling or relative. Also the able account is still investing in the stock market and money market accounts that are not guaranteed. Also 100,000 dollars for the course of a life time isn’t alot of money if you go one penny over you lose your benefits and have to go through all the read tape to re apply.

    • Jimbob

      Did you read the article? It clearly states that benefits would be suspended until it drops below $100k, and then they would resume (without all the red tape).

    • GodBlessChildren

      You can take money out and buy a house and then save more money..??

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  • cam

    What qualifies someone as “disabled”? Im all for this so long as it isn’t another way to make it easier for freeloaders to leach off the system over something like a broken arm or leg…

    • Jimbob

      Did you read the article? It clearly says who would be considered disabled and how proof would be required.

    • 21artisan

      I think that the law means a disability that may be more permanent than that. I understand your concern, but I think that the law is pretty explicit about that. 🙂

  • Sheryl Ann Kuenzer

    I would like to travel some day and under the law as it stands at the present time I am only allowed to save $2000. Most tours are over $2000, my question is this if I save under the ABLE Act would I be allowed to use monies for going on trips? Who can put money into the account?

  • Jack Lancellotta

    Propose legislation as the SSI SAVERS ACT, SUPPLEMENTAL SECURITY INCOME RESTORATION ACT and the (A)chieving a (B)ETTER (L)IFE (E)XPERIENCE or A.B.L.E. ACT are vitally needed for our millions of DISABLED & POOR ELDERLY that have been unfairly treated since the inception of these laws and morally, ethically and subsistently, require much more care and assistance than average or wealthy citizens …

    … and thus, should not have to struggle and live with the burden of unreasonable Asset Testing / Resource Limits with penalties that are overwhelmingly harsh, outdated and extraordinarily unfair – pass such regulatory
    changes for the DISABLED! = Thank You!

    The A.B.L.E. Act should be
    flexible for those Disabled Citizens to have oversight and control of their account and personal lives!

    • GodBlessChildren

      ABLE is not for the elderly, its for our youth.

      • Zen Jen

        There is nothing in the ABLE act that disallows older folks from opening an ABLE account.

      • 21artisan

        It can be used for anyone with a disability onset before the age of twenty-six, including the elderly. So, I beg to disagree with you on that. Plus, it might be raised to forty-six years of age soon.

  • Jack Lancellotta

    ensure that the 26 years-old qualification proviso in this bill be eliminated to
    be truly fair and equal….

    the ‘pay-back’ provision could be amended to a 50/50 split where half can be
    allocated to the Disabled Citizens Estate and the remains over to the government

    funding for the 529 accounts, universally acts as an economic factor that draws
    a saving element and spending action that can offset any potential loss to the
    Treasury as a CBO report has indicated …

    entire realm of the Disabled Citizen being penalized under the current
    rule-making authority, is not only out-of-date since 1989 and 1972 respectively,
    but grossly unfair and financially debilitating .. Remember, Disabled Americans
    on all levels pay taxes … from Sales & Excisie Taxes to Property and User
    Fees.. and in some allowable cases, Income Taxes as well …

    Our Congress pass a fair, equitable and modern A.B.L.E. Act for all our
    responsible, vulnerable and valuable Disabled American Citizens – GOD BLESS

    • GodBlessChildren

      Its Achieving a better lifetime experience act. Its so the young generation can achieve more not so the old generation can save more money. 26 is more than fair.

      • 21artisan

        I think what you are saying is a little limiting. Sure, twenty-six years is an age that is sufficient for a lot of people. But, I agree with Mr. Lancellotta that the age limit should be raised to include every permanent and/or total disability regardless of age. Should it not be “God Bless Us Everyone?”

  • Jack Lancellotta

    want to commend those groups and so many others who have worked tirelessly to
    encourage the Congress to enact more fairer and equal laws and rule-making
    procedures for America’s Disabled Citizens.

    ABLE ACT is a neat concept based upon the 529 college fund practices, however as
    has been pointed put – notwithstanding the so-call ‘tax expenditure’ effect – I
    am concerned about the provision for qualification only to 26 years-old …
    versus the many other people that are quite limited in their life
    & lifestyle, yet suffer the utter finaancial burdens and penalities as well.
    For example, a $2,000 limit for all assets versus some reasonable index feature
    for a meager savings allowance . After all, these people are DISABLED, not
    prisoners, tax cheats or subversionaries to the nation.

    theory and practice, the
    entire realm of the Disabled Citizen being penalized under the current
    rule-making authority, is not only out-of-date since 1989 and 1972 respectively,
    but grossly unfair and financially debilitating .. Remember, Disabled Americans
    on all levels pay taxes … from Sales & Excisie Taxes to Property and User
    Fees.. and in some allowable cases, Income Taxes as

    the ‘pay-back’ provision could be amended to a 50/50 split where half can be
    allocated to the Disabled Citizens Estate and the remains over to the government
    which would be a real deal to emulate something credible to the Disable person.

    the funding for these 529-like accounts, universally acts as an economic factor
    that draws a saving element and spending action that can offset any potential
    loss to the Treasury as a CBO report has indicated.

    Thus, another G R E A T attempt to help and
    resolve the unconscionable status of our Young Disabled and Poor Elderly
    Citizens who literally exist on the cusps of societal poverty, is to look at
    two(2) previous pieces of proposed legislation, the *SSI SAVERS ACT and Supplemental Security Income Restoration Act.

    Such cost-effective legislation would give a
    small boost of financial support (private NOT Public funds!!!) to those
    Disabled individuals via their family members, friends and care takers that
    sacrifice to assist such unfortunate circumstances everyday. It would also bump
    up the resource level, provide an educational component and allow a small and
    necessary retirement funs through personal funding.

    Also, a sound feature of the “SSI Restoration Act” would also eliminate a rule requiring the
    loss of some benefits for SSI beneficiaries who also receive non-cash in-kind
    assistance. This provision is unfair to affected individuals and has proven to
    be enormously difficult for the Social Security Administration to

    Let’s work together to ask Congress for an immediate correction
    to our Disabled Citizenry NOT eligible for the A.B.L.E. Act and to bring some
    dignity into their very own struggling and disadvantage

    Thank You, God Bless You & God Bless

  • 21artisan

    I have a question concerning the ABLE account application process. Does it take a certain amount of time for the applicant to receive confirmation that the application went through? I tried calling the financial institution in charge of the Minnesota ABLE Plan about my application status, and I got the runaround. Can you give me any information concerning this question? Thanks.


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