Parents with adult or minor children with disabilities face a difficult trade-off.
Because Social Security Income (SSI) and Idaho Medicaid both contain strict asset limits, many parents must choose either to save for their child’s future and risking losing public benefits or keep their child “poor enough” to qualify for SSI and Medicaid. As parents age and begin to consider estate planning this problem grows—leaving an inheritance for a disabled child creates a risk that child will be disqualified from the benefits that have assisted the child for their entire life. Two primary estate planning strategies exist for parents of disabled children seeking to pass on wealth: Supplemental Needs Trusts (SNTs) and Achieving a Better Life Experience (ABLE) accounts.
Unlike SNTs, which require the assistance of a lawyer to draft, everyday Idahoans can open an ABLE account for a disabled child.
What are the benefits of an ABLE Account?
An ABLE account is a tax-advantaged savings and investment account for disabled individuals. The core idea behind ABLE accounts is simple: money held in a qualifying ABLE account does not count towards the asset limit for SSI and Medicaid. In addition, ABLE accounts grow tax free and withdrawals from ABLE accounts are not counted as taxable income for the disabled individual.
ABLE accounts are linked to an individual’s Social Security number and no person can have more than one ABLE account. An individual is eligible for an ABLE account if they (1) qualified for SSI or SSDI benefits based on blindness or disability before the individual turned 46, or (2) submit an annual certification of disability and supporting documentation demonstrating a qualifying disability that started before the age of 46.
What are the limitations on an ABLE account?
There are three primary limitations to ABLE accounts. First, an ABLE account can only shield $100,000 from being counted toward the SSI and Medicaid asset limit. Second, annual contributions to an ABLE account are limited to the annual gift-tax exclusion amount, which is $19,000 in 2026. Third, money in an ABLE account can only be spent on “qualified disability expenses.” While this term is defined broadly as any expense which benefits the disabled individual and is related to their disability, ABLE accounts are reported when recertifying for SSI or Medicaid and the expenses are subject to audit. Any funds found to be used for non-qualifying expenses incur a 10% tax penalty.
When does an ABLE account make sense?
There are two chief drawbacks that determine when an ABLE account, rather than an SNT or other planning, could be beneficial for a disabled individual. The first drawback is that contributions to an ABLE account are considered completed gifts, meaning that once contributed, funds in an ABLE account belong to the disabled individual, who may spend the funds in any way they desire, including in ways that may trigger the 10% tax penalty. The second drawback is that funds in ABLE accounts are subject to the Medicaid payback rule, meaning that any funds remaining after the death of the disabled individual will be repaid to Medicaid up to the amount Medicaid paid on the disabled individual’s behalf.
Based on these drawbacks, ABLE accounts may make the most sense in the following circumstances:
• Parents with a small estate who want their child to continue qualifying for public benefits where it is likely the child can use the bulk of the ABLE funds during the child’s lifetime.
• A disabled child who requires public benefits but has a high level of independence and decision making.
If a disabled child is already making some or all of their financial decisions, the tax advantages available for ABLE accounts are likely better than using a traditional bank account.
• A disabled child who is already over the asset limit for SSI and Medicaid.
ABLE accounts are available to all disabled individuals, whether or not they currently qualify for public benefits. If a disabled child is already disqualified because of other assets, ABLE accounts can offer a taxprotected investment and savings plan.
ABLE accounts give Idaho families a way to save and invest for a child with a disability without sacrificing the benefits that child depends on. While they might not fit every situation, parents should consider discussing with an attorney or financial planner about whether an ABLE account can help protect their child’s eligibility for public benefits while creating a tax-benefitted savings and spending account.
