“ABLE accounts are a way for people with disabilities to save and spend money, while protecting their access to public benefits.”
An ABLE Account (Achieving a Better Life Experience Account) is a tax-advantaged savings account available to individuals diagnosed with disabilities. It lets them save without putting their public benefits at risk. Contributions to the ABLE account may be made by the account owner, family members, friends, trusts or any other person, as explained in the article “What Qualifies as Eligible Expenses for an ABLE Account?” from Investopedia. The money can be maintained in the account tax-free or spent on certain expenses, which are called “eligible expenses” or “Qualified Disability Expenses” (QDEs) and cover a broad range of goods and services. In some cases, figuring out if an expense meets the criteria is easy. However, in others, it is not so clear.
Typical QDEs include education, employment training, food, shelter, transportation, assistive technology, health, prevention and wellness, financial management of the ABLE account, including oversight and monitoring, legal fees, funeral and burial expenses. In all cases, keep detailed records of how ABLE funds are spent, just in case there is a dispute about whether an expense qualifies.
The law governing ABLE accounts does not spell out every single QDE. Sometimes the IRS or Social Security Administration will issue guidance to clarify whether an item is a QDE. The law says the term should be “broadly constructed to permit the inclusion of basic living expenses and should not be limited to items for which there is a medical necessity, or which provides no benefits to others in addition to the benefit to the eligible individual.”
Note that ABLE account funds may be used for a vacation, if it helps maintain or improve the health, independence, or quality of life for the disabled individual. The food category includes more than groceries: food delivery and restaurant meals are included.
A few tips:
- If in doubt, use non-ABLE money and save the ABLE funds for eligible purchases.
- Use public funds when possible. For instance, Medicaid may pay for transportation to a health care provider or educational programs.
- Keep extensive records, especially for items you are not sure about.
It is great for the disabled individual to have this much flexibility. However, it can also be confusing. An elder law estate planning attorney will be familiar with the guidelines and help ensure that the funds are used properly.
Reference: Investopedia (Feb. 25, 2022) “What Qualifies as Eligible Expenses for an ABLE Account?”