Pros and Cons of the ABLE Account

After receiving a few calls regarding the ABLE Account, I thought I might draft a quick summary of the benefits and drawbacks of the ABLE account. First, the ABLE account is a relatively new planning strategy that allows individuals receiving means-tested benefits, such as Supplemental Security Income (SSI) to shelter some of their income and/or assets from the $2,000 asset limit. These funds can be used for qualified expenses such as basic living expenses, health & wellness, housing, transportation, education & training, and legal and accounting fees. The ABLE account is a very important strategy in special needs financial planning.

There are several advantages of using the ABLE account. As noted above, the funds in the ABLE account are excluded from the asset limit common with means-tested programs such as SSI and Medicaid. Also, the use of the ABLE account can foster independence for the beneficiary as they may be able to manage the account, if appropriate.

As with most planning strategies, there are usually drawbacks to consider before moving forward. You must be aware that any funds left in the account at the death of the beneficiary may be subject to estate recovery for Medicaid benefits. Therefore, ABLE accounts should be used with other strategies to limit exposure to estate recovery.