Use an ABLE account for Qualified Disability Expenses (QDEs)
Learn how to use an ABLE account as an alternative or companion to a Special Needs Trust (SNT) for disability-related expenses like food, housing, transportation and more.
Manage your spending without impacting your government benefits with an ABLE account. ABLE funds can pay for education, housing, transportation, employment, assistive technology and adaptive equipment, health, prevention and wellness, legal and financial services, funeral and burial, basic living expenses and more.
Be sure to keep good records of all your spending, because the IRS has the right to ask for verification for each expense. An expense is qualified if it meets all three requirements:
- It was incurred at a time the individual was eligible for an ABLE account.
- It relates to the disability.
- It helps to maintain or improve health, independence or quality of life.
Examples of qualified education expenses
- School tuition – pre-school through post-secondary
- School supplies
- Other educational materials
- Text books
- Certification
- Trade school
- Attendant fees
Examples of qualified housing expenses
Qualified housing expenses make an ABLE account different from a Special Needs Trust (SNT), since distributions to pay for housing costs are not counted as income for SSI qualifications, if spent in the month received.
- Rent
- Purchase of a primary residence
- Mortgage payments
- Real property taxes
- Utility charges
Examples of qualified employment expenses
- Job-related training
- Tools of the trade
- Certification and licensing fees
- Work-related uniforms
- Job coaching
- Start-up fees for entrepreneurs
- Moving expenses
Examples of assistive technology and adaptive equipment
- Hearing aids
- Wheelchairs
- Transfer devices
- Walkers
- Prosthesis
- Screen readers, magnifiers and magnifying software
- Braille
- Tactile keyboards
- Wearable technology
- Accessibility software and computer devices
- Personal emergency response system (PERS)
- Alerting Devices
- Memory Aids
- Educational Software
- Home automation
- Augmentative and Alternative Communication Devices (AAC)
Examples of qualified health, prevention and wellness expenses
- Health insurance
- Mental health, medical, vision and dental expenses
- Habilitation and rehabilitation services
- Durable medical equipment
- Therapy
- Personal assistance
- Respite care
- Long-term services and supports
- Nutritional management
- Communication services and devices
Non-qualified expenses
If ABLE account funds are used on non-qualified expenses, regular income taxes plus 10% additional tax on the earnings portion of those non-qualified distributions will need to be paid. And, those distributions may impact your eligibility for federal benefits, like Medicaid or SSI.
Impact on federal benefits
Most federal benefits disregard or favorably treat ABLE assets — so you have a better chance of becoming and remaining eligible for them.
Supplemental Security Income (SSI)
SSI disregards up to $100,000 in ABLE account assets. SSI payments will be suspended if the beneficiary’s account balance exceeds $100,000, but SSI eligibility will not be terminated.
ABLE funds used for housing expenses will not affect SSI payments, as they’re not counted as income or in-kind support maintenance. ABLE distributions intended for housing must be spent in the month they are taken.
Medicaid
Medicaid disregards ABLE assets when determining eligibility, and Medicaid benefits are not suspended if the ABLE account balance exceeds $100,000.
At the end of the designated beneficiary’s life, the ABLE account becomes part of the estate and is subject to Medicaid payback. Each state’s Medicaid payback policy may differ, and some choose not to recapture at all. Medicaid may become a creditor of the account but is not the beneficiary, so Medicaid can only ask for payback for expenses incurred while the account was open.
Executors can pay outstanding (QDE) bills and funeral and burial expenses from the ABLE account prior to Medicaid payback. There is no “named beneficiary,” so a will, executor, and the probate process will dictate where any remaining funds go.
Action Steps
- Check your eligibility and open an ABLE account.
- Save for your goals and Spend ABLE funds on qualified expenses.
- Maintain your means-tested government benefits.
- Talk to a financial advisor to get started.