Understanding ABLE Accounts: Financial Independence for Individuals with Disabilities

 

Key Points

  • ABLE 529 accounts are state-sponsored savings accounts for people living with disabilities. 

  • These accounts offer tax advantages while also protecting government benefits, which is one of their greatest strengths.

  • ABLE accounts cover a broader spectrum of needs, including housing, employment training, transportation, and assistive technology.

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For families caring for loved ones with disabilities, navigating financial planning while not losing essential government benefits can be challenging. ABLE accounts, also known as 529A accounts, offer a solution that bridges this gap, providing tax-advantaged savings opportunities while maintaining eligibility for crucial assistance programs.

What Are ABLE Accounts?

ABLE  stands for Achieving a Better Life Experience. These state-sponsored savings programs allow individuals with disabilities and their families to save for qualified expenses while preserving eligibility for essential government benefits. Unlike traditional 529 plans that focus solely on education expenses, ABLE accounts cover a broader spectrum of needs, including housing, employment training, transportation, and assistive technology.

Eligibility and Contribution Guidelines

To qualify for an ABLE account, individuals must have been diagnosed with a significant disability before they turned 26, with the condition expected to last at least 12 consecutive months. The disability must substantially limit the individual's ability to function independently in family, community, or employment settings.

For 2025, the annual contribution limit is $19,000 per beneficiary. Working account owners may be eligible to contribute additional funds up to the federal poverty level amount  or their gross wages, whichever is less. Married couples can contribute jointly up to $38,000 without triggering gift tax implications.

Preserving Government Benefits

One of the most significant advantages of ABLE accounts is their ability to allow individuals to save without losing government benefits. Previously, individuals with more than $2,000 in assets could lose eligibility for crucial assistance programs. ABLE accounts allow families to save up to $100,000 without affecting SSI benefits. Even if the account balance exceeds $100,000, only SSI payments are temporarily suspended — eligibility for other benefits remains intact.

Tax Advantages for Illinois Residents

Illinois residents enjoy substantial tax benefits when contributing to Illinois ABLE accounts:

  • State income tax deductions of up to $10,000 for individual filers and $20,000 for joint filers

  • Tax-free earnings and withdrawals when used for qualified disability expenses

  • Potential eligibility for the federal retirement savings contributions credit (saver's credit), ranging from 10% to 50% of contributions based on adjusted gross income

Qualified Expenses and Account Management

ABLE accounts can fund a wide range of disability-related expenses, including:

  • Education and employment training

  • Health and wellness services

  • Housing and transportation

  • Legal fees and financial management

  • Assistive technology and personal support services

  • Funeral and burial expenses

Account owners can adjust their investments twice per year, providing flexibility to adapt to changing needs and market conditions. New contributions can be invested into any asset allocation when contributed.

Account Ownership and Succession Planning

The individual with the qualifying disability owns the ABLE account, though it may be managed by an authorized representative if needed. This could include a power of attorney, legal guardian, parent, sibling, grandparent, or Social Security Administration-appointed representative.

Succession planning is more complicated..  The successor must be an eligible individual. If there isn’t someone who qualifies, it may be better to leave the plan with no successor. Upon the original account owner's passing, the account’s balance would go to the owner’s estate where it will be distributed according to the individual's estate plan. You can name a successor authorized individual to help manage the account if the original authorized individual dies.

Working with Your Financial Advisor

At Capstone Financial Advisors, we understand the complexities families face when planning for loved ones with disabilities. Our team takes an integrated approach, working closely with you to:

  • Evaluate whether an ABLE account aligns with your family's broader financial strategy

  • Coordinate with your tax professional to maximize available deductions and credits

  • Review investment options and contribution strategies

  • Ensure compliance with contribution limits and qualified expense guidelines

  • Integrate ABLE account planning with other special needs planning tools

ABLE accounts represent a vital tool in special needs financial planning, offering families the ability to save for their loved ones' future while maintaining essential benefits. Through careful planning and professional guidance, these accounts can help create a more secure financial future for individuals with disabilities.

To learn more about how ABLE accounts might fit into your family's financial strategy, contact our team at Capstone Financial Advisors. We're here to help you navigate these important decisions with confidence and care.

Disclosures:

This article is not a substitute for personalized advice from Capstone and nothing contained in this presentation is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed by other businesses and activities of Capstone. Descriptions of Capstone’s process and strategies are based on general practice, and we may make exceptions in specific cases. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review by contacting us at capstonefinancialadvisors@capstone-advisors.com or (630) 241-0833.