ABLE Accounts for Disabled Persons in New York

Many of us are familiar with the use of supplemental needs trusts for disabled beneficiaries receiving critical government benefits. Since 2014, disabled persons have had available an additional planning tool for protecting their monies while remaining eligible for government benefits, such as Supplemental Security Income (SSI) and Medicaid. The federal Achieving a Better Life Experience (ABLE) Act permitted states to establish savings account programs for disabled persons with certain tax and other benefits.  States such as NY have adopted laws governing the administration of ABLE accounts. In NY, only NY residents can enroll in NY’s ABLE account program.

To be eligible to benefit from an ABLE account, a person must have been blind or disabled prior to the age of twenty-six (26) and must be entitled to receive either SSI or Social Security Disability Insurance (SSDI) as a result of his/her disability. To qualify as disabled, the person must be classified as blind; have a disability that is included on a list of the Social Security Administration’s Compassionate Allowances Condition; or have a written diagnosis from a licensed physician of a medically determinable impairment (physical or mental) that results in marked and severe functional limitations that can cause death or can be expected to last for a year.

Generally, the maximum allowable contribution to an ABLE account is $15,000/year, although ABLE account holders who earn income and are not contributing to a retirement plan may contribute additional amounts. Generally, a person must have assets of under $2,000 and countable income under a certain amount to be eligible for SSI. However, funds deposited in an ABLE account up to $100,000, and income earned on assets in the ABLE account, are not considered by the government in determining whether a person is eligible for SSI benefits. There is no balance limit on ABLE accounts for Medicaid eligibility, although annual contributions are still generally limited to $15,000.  Monies in ABLE accounts can be accessed by check or debit card, online or via mail.

The earnings on investments in ABLE accounts are federally tax-deferred. Funds in the ABLE account can be withdrawn without penalty and tax-free if used for qualified expenses that are related to the person’s disability. Qualified expenses include those for:

  • Transportation;
  • Legal and investment fees;
  • Education;
  • Housing;
  • Assistive devices;
  • Supportive services;
  • Health and well-being;
  • Employment support and training; and
  • Funeral and burial costs.

If funds in an ABLE account are used for expenses considered non-qualified, there is a ten (10) percent federal withdrawal penalty, and the earnings portion of the withdrawal is subject to federal and state income tax. Other fees include a nominal annual fee and, potentially, investment management fees.

ABLE accounts can provide disabled persons with some measure of financial independence, while saving them legal and trust administration fees. The $100,000 funding limitation for SSI beneficiaries, however, means that, for many disabled people, ABLE accounts are a useful adjunct to, and not a supplement for, supplemental need trusts.


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