ABLE Accounts and Qualified Disability Expenses: How to Get it Right

ABLE accounts are a great tool for people with disabilities that is increasingly being used by families as part of their special needs plan for children with developmental disabilities. A lingering and persistent question for these families surrounds ABLE accounts and qualified disability expenses and what a qualified disability expense actually is.

Parent about to take notes on qualifying expenses to be paid from an ABLE account.

ABLE Accounts and Qualified Disability Expenses

To receive the protections and benefits of ABLE, the account can only be used to pay for Qualified Disability Expenses. An expense is “qualified” if:

  1. You incurred the expense at a time when you were considered an Eligible Individual (see “Eligibility” above);
  2. The expense relates to your disability.

The expense does not need to be “medically necessary” nor does it need to be for the sole benefit of the Eligible Individual.

Using the money in an ABLE account to purchse gifts for others is probably not related to the disability, but it’s not always easy to determine whether other types of expenses are allowed.

Social Security Administration Guidance

Each state program is charged with defining this term, and most states have developed very broad definitions that encompass most common uses for money in these accounts. However, we have some giudance from the social security administration. The following list is set out in social security guidelines for their examiners.

Qualified disability expenses (QDEs) are related to the blindness or disability of the designated beneficiary and for the benefit of the designated beneficiary. In general, a QDE includes, but is not limited to, an expense for:

  • •Education;
  • •Housing;
  • •Transportation;
  • •Employment training and support;
  • •Assistive technology and related services;
  • •Personal support services;
  • •Health;
  • •Prevention and wellness;
  • •Financial management and administrative services;
  • •Legal fees;
  • •Expenses for ABLE account oversight and monitoring;
  • •Funeral and burial; and,
  • •Basic living expenses (includes food)

Housing expenses detailed

The agency goes on to say that housing expenses include expenses for:

  • •Mortgage (including property insurance required by the mortgage holder);
  • •Real property taxes;
  • •Rent;
  • •Heating fuel;
  • •Gas;
  • •Electricity;
  • •Water;
  • •Sewer; and
  • •Garbage removal.

Why these things matter

Under federal law, the money in an ABLE account (up to the annual and lifetime maximums) is not considered when determining the eligibility of the account holder for SSI or medicaid benefits. However, even if the amount of money in the account meets the requirements, if the account is not used as intended then social security could determine that it no longer qualifies as a proper ABLE account, and would no longer be excluded from consideration for eligibility purposes. In less lawyerly language, this means if you don’t use the account the right way and spend money on the wrong things, you could lose the protection of the account.

How Do ABLE Accounts Fit Into the Larger Plan?

ABLE accounts are a valuable tool as part of your overall special needs plan for your child. They are useful for adults with disabilities who have the ability to manage and use money on their own, allowing them to save and spend without the restrictions otherwise imposed by SSI requirements.

But even for adults who are not able to handle their own money, these accounts provide a simple place to stash smaller cash windfalls, like the stimulus checks that arrived during the pandemic, or any gift from grandparents or others, as long as it is less than the yearly contribution limit. The accounts can also be used to supplement housing and food expenses without causing a reduction in SSI benefits.

A frequent question in the minds of parents is whether they should have an ABLE account or a special needs trust for their child. ABLE accounts are NOT a subsitute for a special needs trust. They serve different purposes and work in different ways. Some things you can do with a special needs trust cannot be done with an ABLE account, and some things an ABLE account can do a special needs trust cannot do.

Almost all families will need to create a special needs trust, but not all families will need an ABLE account – but many families will benefit from having both a special needs trust and an ABLE account. And depending on the situation, some families will need more than one special needs trust.

Who is eligible for an ABLE account?

ABLE accounts are a great tool for people with disabilities, but not everyone is eligible. A person of any age can open an account, but the disabling conidtion must have started before the age of 26. A parent can open an account for a minor, as long as there is a disability, or the disabled individual themselves can open an account once they turn 18. If the disabled individual is not able to handle their own affairs, a guardian or other person with authority can open the account on their behalf. Even disabled individuals over the age of 26 can open an account, as long as the disabliity began before age 26.

Disability can be established by indicating receipt of SSI or Medicaid benefits. If the individual is not receiving SSI at the time of opening the account, a medical statement of disability can be used to establish eligibility for the account.

Opening an account

ABLE accounts are authorized by federal law. Each state is responsible to create an ABLE program. Most state programs allow people from any state to open an account, so an individual can compare the features of different programs and choose the one that best fits their needs. The ABLE National Resource Center has a comparison tool for all the existing ABLE account programs, and links to each program that will provide information on opening an account. You don’t need an attorney to open an account, but the use of an ABLE account and how it fits into your overall special needs legal plan should be part of a consultation with a special needs law firm attorney.

Once you have an account, develop a method for keeping track of yearly contributions so that you don’t exceed the yearly limit. Make sure you provide information about contributing to the account to relatives who may give substantial gifts to your child, or who may want to make regular contributions for housing or other monthly costs.

Maintenance and closing an account

Individuals may have only one ABLE account. However, an existing account can be transferred to another state program if at some point a different program is a better fit. An existing 529 college savings plan for the disabled individual can also be rolled into an ABLE in some situations, if it’s determined that the individual will not be incurring college or other qualifying educational expenses. Unneeded 529 accounts can also be handled in a few other ways, but it is beyond the scope of this article to get into that.

At the end of the life of the account holder, any money remaining in the account may be claimed by a state Medicaid program that has paid benefits on behalf of the individual. If Medicaid does not make a claim, or if there is still additional money after the claim, that money will go either to the estate of the disabled individual, or according to a beneficiary designation made by the individual.

Parker Counsel Legal Services is a special needs law firm providing estate planning, special needs trusts, guardianship, and more to families with children who have developmental disabilities. Offices in Texas, Massachusetts, New Jersey. To see how we can help your family prepare for the future, schedule a short phone call here, or call 833-Red-BOOT (833-733-2668) or email at