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ABLE Account - Explained

What is an ABLE Account?

Written by Jason Gordon

Updated at September 26th, 2021

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Table of Contents

ABLE Account DefinitionA Little More on What is an ABLE AccountABLE Account vs. TrustsAcademic Research on ABLE Account
Back to: INHERITANCE, ESTATES, & TRUSTS

What is an ABLE Account?

In the United States, an individual below the age of 26 and is diagnosed with a major disability is eligible for an ABLE account. An ABLE account refers to a savings account specifically set up for people who suffer from major disabilities before they turn 26. This type of account is tax-advantages and it accommodates contributions from individuals who desire to support the disabled individual. There are some regulations for the ABLE account. For instance, the maximum amount of money that is permissible in the account for a year is $15,000. Tax cannot be deducted from the account.

How Does an ABLE Account Work?

An individual with a significant disability can open the ABLE account. This account is also called a 529 ABLE or 529A account. The account is designed by the United States to help people suffering from disabilities. ABLE is an acronym for Achieving a Better Life Experience. This programme was enacted in 2014 by Achieving a Better Life Experience Act. Friends, family members or members of the community can make a gift donation into the ABLE account. Contributions from this account relieve individuals suffering from disabilities and the families from enormous expenses that come with living with a disability. Other expenses of the individual can also be catered for with the funds.

ABLE Account vs. Trusts

Before the ABLE account was created through Achieving a Better Life Experience Act of 2014, trusts are ways through which families raise funds for disabled individuals. Trusts and ABLE accounts are not the same, while setting up trusts require the service of a lawyer, ABLE accounts do not. Also, unlike ABLE accounts, trusts are not tax-advantages, they attract fees which might be sometimes high. However, unlike an ABLE account that has the limit of $15, 000 as contribution sit can receive annually, the limit for trusts in many states is $300,000. ABLE accounts generally have more guarantee than trust, in the sense that is a trust is not set up properly, getting funds from it might be difficult.

Related Topics

  • ABLE Account
  • Accumulated Income Payments (Canada)
  • Charitable Split-Dollar Insurance Plan
  • Coverdell Education Savings Account

Academic Research on ABLE Account

  • ABLE Act Accounts: Achieving a Better Life Experience for Individuals with Disabilities with Tax-Preferred Savings (and the Old Reliable Special and Supplemental , Rephan, D. A., & Groshek, J. (2016). Mitchell Hamline L. Rev., 42, 963. This paper provides a fundamental overview of the new ABLE accounts and the role they play in assisting elderly clients in planning for their disabilities or the disability of a family member. It also presents an overview of the ABLE Act in terms of its general restrictions and parameters. 
  • ABLE accounts: A down payment on freedom, Morris, M., Rodriguez, C., & Blanck, P. (2016). Inclusion, 4(1), 21-29. This paper discusses the ABLE ACT which represents a transformative policy change that opens new pathways to advance independence and economic self-sufficiency for individuals with significant disabilities. It also explains the critical elements of ABLE implementation and describes the impact of ABLE on future disability policy and program development. 
  • A Primer on ABLE Accounts, McGee, C. T., & Ferguson, G. A. (2017). U. Rich. L. Rev., 52, 149. This article discusses one of the most significant pieces of legislation known as the Achieving a Better Life Experience (ABLE) Act that created tax-advantaged savings account for individuals with eligible disabilities that allows these individuals and their families to save for their daily and future expenses in significant amounts without affecting their public benefits. 
  • Making the law more ABLE: Reforming Medicaid for disability, Hoffer, S. R. (2015). Ohio St. LJ, 76, 1255. This article states that despite their facial neutrality, income and assetholding restrictions result in undue hardship when they are applied to the provision of government-coordinated habilitative care for individuals with significant disabilities. It also states that the attempts by Congress to mitigate this hardship, including the ABLE ACT, are essential steps forward. 
  • A 50-State Review of ABLE Act 529A Accounts., Kelly, A., & Hershey, L. (2018). Journal of Financial Service Professionals, 72(2). This paper reviews recent literature, legislation as well as account information concerning 529A accounts that were created, the ABLE Act and also analyzes the ABLE savings programs across all 50 states. It concludes that this analysis indicates that planners should consider various important questions when deciding the state ABLE program best serving a client's needs.
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