Families of people with disabilities often face higher out-of-pocket costs and more frequent financial stress than other households. Each month, we highlight one topic — from ABLE accounts to policy changes and local resources — to explain what it is, why it matters, and how it might affect day-to-day life, in clear, non-technical language.
Achieving a Better Life Experience (ABLE) accounts are tax-advantaged savings accounts for people with disabilities created under Section 529A of the tax code. They are designed to let eligible individuals and their families save for qualified disability expenses without jeopardizing eligibility for many means-tested benefits. Qualified expenses are broadly defined and can include housing, transportation, education, assistive technology, employment supports, basic living costs, and more.
To use an ABLE account, an eligible individual (whose disability began before a specified age) is named as the account's beneficiary. Contributions can come from the beneficiary, family members, friends, employers, or even certain trusts, subject to annual limits. Within the account, funds can be held in cash or invested, and earnings grow tax-deferred. Withdrawals are generally tax-free when used for qualified disability expenses.
Families often find ABLE accounts most effective when they are tied to clear goals — such as building a modest emergency reserve, saving for accessibility-related home or vehicle costs, or funding additional therapies and supports. Simple practices like small automatic contributions, tracking withdrawals, and reviewing investment choices periodically can help the account stay aligned with the beneficiary's needs.
Common pitfalls include spending on non-qualified expenses, which can trigger tax consequences and potentially affect benefits. Other issues arise when total annual contributions from all sources exceed the allowed limit, when account balances grow high enough to interact with certain benefit thresholds, or when families overlook state-specific rules, fees, or potential Medicaid "payback" provisions at the beneficiary's death.
Planning around disability, benefits, and long-term security is complex, and there is no one-size-fits-all solution. This series is for education only and is not financial, legal, or tax advice; when you are ready to explore what makes sense for your own situation, consider talking with qualified professionals who understand both special needs planning and your family's goals.
Anthony Lishka, ChFC®, ChSNC®, CPFA®, CF2®
Lishka Financial® | www.lishkafinancial.com