Disability Asset Limits: Understanding the Achieving A Better Life Experience (ABLE) Act

Disability Asset Limits: Understanding the Achieving A Better Life Experience (ABLE) Act

Understanding Individual Asset Limit for Individuals Receiving SSDI or SSI Disability Benefits

  As discussed in previous blog posts, there is a strict asset limitation for individuals who receive Supplemental Security Income (SSI). That limit is $2,000 for an eligible individual and $3,000 for an eligible couple. Certain assets do not count towards the limitation, such as a house and one car. Either way, an asset limit of $2,000 for an individual is quite low and effectively prevents that person from being able to save money.

Tax Advantaged Savings Account for Individuals on Disability

One solution to this problem that many Wisconsinites are unaware of is an ABLE account. ABLE accounts were created by the 2014 Achieving a Better Life Experience (ABLE) Act. An ABLE account is a tax-advantaged savings account available to individuals diagnosed with significant disabilities before age 26. Contributions can be made to the account by the beneficiary, friends, or family members. The ABLE program was designed to allow disabled people to save money without losing eligibility for these benefits. Funds in an ABLE account do not, for the most part, count toward an individual's eligibility for these programs. ABLE accounts can only be opened by working with a state ABLE program. The reason many Wisconsinites are unfamiliar with this program is because Wisconsin is one of just 4 states that does not operate a state-sponsored ABLE program, along with South Dakota, North Dakota, and Idaho. But, provisions under the federal ABLE Act allow citizens of one state to open an account in another state if that state allows for out-of-state residents. This means that Wisconsin residents may open ALBLE accounts in a different, participating state. The following states currently allow non-residents to open ABLE accounts in their state: Alabama, Alaska, Arkansas, California, Colorado, Connecticut, Delaware, DC, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Jersey, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Virginia.

Qualifications for Participation in Tax Advantaged Savings Account

As prefaced above, there are some limitations to ABLE accounts. To start, the criteria for eligibility are quite narrow. The individual must have become blind or disabled before the age of 26. Importantly, the age at diagnoses need not be before age 26, as long as the disability began before age 26. But what does “disability” mean? For purposes of ABLE account eligibility, one of the following must apply:

• The individual is entitled to SSDI or SSI benefits based on blindness or disability; OR
• The individual files a disability certification with the qualified ABLE program, including a diagnosis relating to the relevant impairment or impairments signed by a physician, and certifies one of the following:
  • You have a medically determinable physical or mental impairment which results in marked and severe functional limitations, which (a) can be expected to result in death or (b) lasted or can be expected to last for a continuous period of not less than 12 months; OR
  • You are blind within the meaning of section 1614(a)(2) of the Social Security Act

Another limitation is the amount that may be contributed to an ABLE account each year. Generally, the maximum amount of annual contributions that may be made by all contributors to an account for a particular beneficiary is the federal gift tax exclusion amount for the year ($17,000 for 2022). There is also a maximum total that can be in the ABLE account before it counts towards an individual’s asset limitation for SSI purposes. That maximum amount is $100,000. In other words, as long as the balance of the account stays below $100,000, it will not count towards the SSI-recipient’s $2,000 asset limitation. ABLE account monies can be withdrawn at any time for “qualified disability expenses” that help the person’s health, independence, or quality of life. “Qualified” expenses are any expenses related to the account beneficiary’s blindness or disability that are for the benefit of the beneficiary. Examples include:

• Education
• Housing
• Transportation
• Employment training and support
• Assistive technology
• Personal support services
• Health
• Prevention and wellness
• Financial management
• Administrative services
• Legal fees
• Expenses for oversight and monitoring
• Funeral and burial expenses
• Other expenses, which are approved by the Internal Revenue Service under regulations and consistent with the purposes of ABLE programs

Additional information about ABLE accounts can be found at ABLE National Resource Center at ablenrc.org.