ABLE accounts were created by the federal Achieving a Better Life Experience Act and are now available in all fifty states, including New Mexico through the NM ABLE program. They give people with disabilities, and their families, a flexible savings tool that doesn't jeopardize government benefits.
Who qualifies for an ABLE account
To open an ABLE account, the account holder must have a disability that began before age 26. The disability must meet the Social Security Administration's definition of disability, or the individual must be receiving SSI or SSDI. There is no income requirement to open an account.
Note that the age-of-onset requirement is age 26, not the account holder's current age. A 40-year-old whose disability began at age 10 can still open and contribute to an ABLE account.
How ABLE accounts work
Contributions to an ABLE account can come from anyone: the account owner, family members, employers, or others. Annual contributions are subject to a limit tied to the federal gift tax exclusion. Funds in the account grow tax-free and can be withdrawn tax-free when used for qualified disability expenses.
Qualified disability expenses are defined broadly and include education, housing, transportation, employment training, assistive technology, health and wellness, financial management, legal fees, and funeral expenses. This flexibility makes ABLE accounts a versatile tool for day-to-day and longer-term disability-related costs.
For SSI purposes, ABLE account funds up to a specified balance generally do not count as a resource. Above that threshold, funds may count and could affect SSI eligibility. The account holder should monitor the balance to stay within the protected limit.
How an ABLE account differs from a special needs trust
ABLE accounts and special needs trusts serve different purposes and work best together rather than as alternatives. Key differences include:
An ABLE account can be controlled directly by the person with a disability, while a special needs trust is managed by a trustee. ABLE accounts have annual contribution limits that are relatively modest; a special needs trust has no contribution cap. ABLE accounts have an age-of-onset requirement (disability before age 26); special needs trusts have no age restriction. ABLE accounts are simpler and less expensive to establish; special needs trusts require legal drafting and ongoing administration.
For a family with significant assets to leave for a child with a disability, a special needs trust remains the primary vehicle. An ABLE account can handle day-to-day flexibility and smaller amounts that the beneficiary may want to access more directly.
