The Achieving a Better Life Experience (ABLE) Act represents one of the most significant advancements in disability-related financial planning in recent decades. By allowing eligible individuals with disabilities and their families to accumulate resources in tax-advantaged accounts without jeopardizing critical public benefits.

Yet, despite their growing availability across the states, ABLE programs remain underutilized and often misunderstood. Many practitioners, beneficiaries, and fiduciaries are still unfamiliar with the full range of strategic opportunities these accounts offer.

This article provides practical estate planning strategies for ABLE Accounts.

Strategy 1: Coordinate an ABLE Account with a Special Needs Trust

While ABLE accounts have limits on how much can be contributed and saved, a Special Needs Trust (SNT) does not have these limits. This makes the ABLE account a good choice for daily and monthly expenses, and the SNT better for larger or long-term savings, like an inheritance.

A great strategy is to transfer money from an SNT into an ABLE account to pay for qualified disability expenses, especially housing – including rent, mortgage, property taxes, and utility bills. Normally, if housing costs are paid by someone else or from a trust, the beneficiary’s SSI benefit can be reduced by up to $342.33 per month. However, if housing costs are paid directly from an ABLE account, SSI is not reduced. This strategy can save up to $4,107.96 per year ($342.233 x 12). Over 30 years, that is a lifetime saving of up to $123,238.80.

By combining an ABLE account with a Third Party SNT, families can allow the trust to grow and still use the ABLE account for everyday expenses, while keeping SSI and Medicaid.

Strategy 2: Shelter Unexpected Gifts or Windfalls

Sometimes, a person with a disability may receive a surprise inheritance, cash gift, or settlement. This could push their assets over the $2,000 limit and cause them to lose SSI and Medicaid.

To avoid losing government benefits, deposit up to $19,000 (the annual limit) into the ABLE account. This can be done without a lawyer and shields the money from being counted against the person for SSI purposes.

If the amount is more than the ABLE account can hold, the extra money should be placed in a First Party SNT, which does require an attorney to set up. Doing this will allow the person with a disability to use the funds received from their surprise inheritance, cash gift, or settlement, and still receive SSI and Medicaid.

Planning Note: A Third Party SNT is more advantageous than a First Party SNT, because it does not require a Medicaid payback. But a Third Party SNT is not an option for an unexpected gift or settlement once it is received directly by the beneficiary. That’s why advance planning is important to prevent giving money directly to a person who receives government benefits, if at all possible.

Strategy 3: Use The ABLE Account for Funeral & Burial Costs

Money in an ABLE account can be used for funeral and burial costs – but the timing is important. Here’s how it works. The funeral and burial expenses must be paid first before any Medicaid payback occurs. If the State makes a request for Medicaid payback, it will not set aside any funds for funeral and burial expenses.

To use this strategy, reserve some funds in an ABLE account to pay for end-of-life expenses. A family may either prepay funeral and burial expenses with money from an ABLE account or immediately pay for funeral and burial expenses after the person passes. Keep detailed records and receipts for tax and legal purposes.

Example:

Anthony had $6,000 in his ABLE account when he died. His family used $5,500 to cover his funeral within a week. Only $500 was left for a Medicaid payback. If the family had not acted quickly to arrange for funeral and burial expenses, the entire $6,000 could have gone to the State instead.

Strategy 4: Deposit Earned Income into an ABLE Account

If a person with a disability has a job and is not in a retirement plan at work, they can contribute more than the usual ABLE limit. In Louisiana, they may contribute an extra $15,060 in addition to the standard $19,000 limit.

This has several benefits. The money grows tax-free. It doesn’t count against the SSI or Medicaid limit. And, it keeps the person’s benefits safe while building long-term savings.

Compare this to:

• Standard bank accounts – which count against the $2,000 limit

• First Party SNTs – which tax earnings from investments

• Third Party SNTs – which cannot accept income earned by the beneficiary

  
  

Putting earned income into an ABLE account is a great way to save money, reduce taxes, and protect public benefits, all at the same time.

Conclusion

Planning for the future is never one-size-fits-all, and ABLE accounts are no exception. The right strategy will depend on each individual’s goals, benefits, and broader estate plan. If you have questions about how to make the most of an ABLE account, or how it can work alongside tools like special needs trusts or guardianship arrangements, our team is here to help. We welcome you to reach out to our firm for guidance and support as you navigate these important decisions.