ABLE Accounts

In 2015, the US Congress passed the Achieving a Better Life Experience (ABLE) Act.  This act allows a disabled person to set up one savings account which does not interfere with that person’s needs-based public benefits.

At Cookman Law, we are big fans of these accounts.  They allow a disabled person to save more than $2,000 without being disqualified from essential needs-based public benefits.  Also, if that person is receiving SSI benefits, payments for food and housing made from an ABLE account does not decrease the SSI payment.  Along with a special needs trust, these accounts can provide more financial flexibility and independence for a disabled person with capacity.


Here are the key benefits:

  1. A person who became disabled before age 26 can set up one account.  A person is considered “disabled” if they have received a determination by the Social Security Administration as disabled. Alternatively, a doctor can write a letter stating that the person is disabled.
  2. Post-tax funds are deposited into the account, and the funds grow tax-free.
  3. Withdrawals from the account are tax-free as long as they are made for “qualified disability expenses.” This tends to be interpreted as just about anything the disabled individual might need.
  4. Up to $15,000 can be deposited into the account each year. If the account owner is working, he or she can contribute an additional $12,760 (as of 2021).
  5. Once the account reaches $100,000, the account holder’s SSI benefits are suspended. Fortunately, the account holder can continue to receive Medi-Cal benefits.

ABLE Accounts in California

In California, your account must be opened online at  The account holder sets up a bank account at his or her chosen bank, and then provides the account information so funds can be transferred back and forth.  ABLE accounts in California require a minimum initial contribution of $25, and the account holder can receive a Visa debit card to make payments to vendors from the account.  The annual fee is $37/year.

Nina has ABLE account

A step toward independence

“Nina has had an ABLE account for several years now. We have been able to put larger gifts in, as well as recent stimulus money. With the increased balance, we branched out and split the balance between investments and regular banking. Future goals are to set up a recurring payment for rent to establish that she has resources to pay for rent, in order to increase her SSI benefit. This will be a step toward independence for Nina.”

– Connie

Comparing ABLE Account with Third Party SNT

ABLE Account
Third Party SNT
Who can benefit? Only persons disabled before age 26 Any person with a disability
Who can fund? Anyone, including beneficiary Anyone, except beneficiary (must use first party SNT)
How many can person have? One Unlimited
Who inherits on death of person with disability? Medicaid first, then to beneficiary’s heirs (no Medicaid estate recovery in VA, PA, CA) Beneficiary’s heirs or whomever is named in document
How much can fund in a year? $15,000 (or annual gift exemption) Unlimited
Is funding gift-tax free? Yes No
Is there a cap in how much can be in account? Yes, currently $100,000 limitation for SSI recipients & up to State 529-plan limitations No
How is income taxed? No income tax Taxed as a non-grantor trust at highest marginal tax rate
What type of distributions can be made? Only “qualified disability expenses” as defined by government No limitation, except that certain disbursements may reduce or eliminate SSI or Medicaid eligibility
Robbie with an ABLE account

Useful for Many Types of Expenses

“Our family set up an ABLE account when our son, Robbie, turned 18 so that his grandparents could gift him money each year as they do when they deposit into 529 accounts for their other grandchildren. Robbie loves respite camps, travel and has increasingly needed devices to walk and be mobile. Because of this account and our very generous family members Robbie is able to participate at Camp Krem and some wonderful travel camps as well as get a scooter to assist with his mobility. As far as we can tell, since we opened his ABLE account there are only upsides for everyone involved! “

– Beth Goddard

Preserving SSI Benefits

ABLE account holders can use their accounts to preserve their public benefits!  Here is an example: Supplemental Security Income (SSI) is an income stream for disabled individuals that pays about $950/month in California.  SSI is intended to pay the individual’s entire food and shelter costs (which is laughable, especially in California!).  If another person or trust (such as a Third Party Special Needs Trust) pays for that individual’s food and/or shelter, his or her SSI monthly payment will be reduced by about $250/month; this reduction is called In-Kind Support and Maintenance, or “ISM”.  To avoid incurring the ISM deduction, the other person or trust can instead make payments to the individual’s ABLE account, which counts as the individual’s own money, and then this account pays for food and shelter.  In this way, the full SSI benefits are preserved!  Here’s a chart showing how this works:

Gift Taxes: ABLE Accounts vs SNTs

Family members often want to make small gifts to grandchildren or other relatives; a gift under $15,000 (for 2021) usually falls within the “annual exclusion” amount, which allows completed gifts of up to $15,000 without having to report the gifts to the IRS or reduce the giver’s estate tax exemption.  A gift made directly to a disabled grandchild could interfere with that person’s public benefits, so it could be tempting to make the gift instead to the disabled grandchild’s Third Party Special Needs Trust.  But this is cumbersome and not ideal, for several reasons: (1) the annual exclusion does not apply to a gift made to a properly-drafted Third Party SNT, as it is not a “completed” gift; (2) the giver must report the gift to the IRS on a Form 709 (gift tax return), and that gift reduces the giver’s estate tax exemption dollar-for-dollar; (3) the trustee of the SNT needs to obtain a Tax ID number for the SNT, and file yearly income tax returns for the SNT.

To avoid these pitfalls, we suggest that gifts of up to $15,000 be made to the disabled grandchild’s ABLE account.  This account is considered the individual’s “own” money, so the gift is a “completed” gift and thus qualifies for the annual gift exclusion.  No Form 709 needed, no Tax ID number needed, no income tax returns needed.  This is win-win!!

  • Both gifts qualify for gift tax annual exemption exclusion (up to $15,000)
  • No tax returns or accounting required
  • No annual exclusion available
  • Grandma and cousin must both file gift tax returns (form 709) the following year in April
  • Trustee must obtain Tax ID #
  • Start filing yearly fiduciary tax returns

Talk to Ellen about ABLE accounts and special needs trusts.