ABLE Accounts

Common Pitfalls

You take money out of your ABLE account but don’t spend it on “qualified disability expenses”

You must spend any money you take out of your ABLE account on qualified disability expenses. If you spend it on expenses that don’t qualify, or if you just put the money in a different account, you may have to pay income tax on that amount, plus a 10% penalty, and this might affect Supplemental Security Income (SSI), Medicaid, or other benefits.

You (or others) deposit too much in your ABLE account in a single calendar year

There are two limits on how much can be put into your account each year, based on where the money comes from:

  • Up to $18,000 from any source (including your family and friends, your benefits, and other unearned income
  • Another $14,580 from your own earned income (if you have a job).
    • Note: If you or your employer make contributions to a retirement plan set up by your employer, you might not qualify for the extra ABLE contribution amount based on having a job (you can still make regular ABLE contributions). If you aren't sure about this, ask your ABLE account program or check with a tax expert. Get more information about this rule from the ABLE National Resource Center.

Learn more about depositing money into your ABLE account.

You don't keep track of the deposits that others make in your ABLE account

It’s important to keep good records. Even if other people make deposits, you are the one who has to make sure that too much money isn’t put into your ABLE account.

Learn more about depositing money into your ABLE account.

You get SSI and let the balance on your ABLE account go over $100,000

If the amount in your ABLE account goes over $100,000, your SSI benefits stop. The suspension has no time limit, and your SSI benefits can start again if the balance drops below $100,000.

Even if SSI benefits stop because you have too much money in your ABLE account, you keep your Medicaid coverage as long as you meet all other eligibility rules.

You want the money in your ABLE account to go to your family if you die

Because the ABLE account has to be in your name, any money left in the account after you die is used to pay back the Medicaid program for any benefits you received since you first opened your ABLE account. Any remaining money has to go through probate (a long process) before it goes to your heirs.

If this could cause problems, look into setting up a third-party (meaning it is in someone else’s name) Special Needs Trust, which has no limit on contributions. (Learn more about Special Needs Trusts.) Also, if you die, the money in the trust isn’t used to repay Medicaid benefits, and it doesn’t go through probate before your heirs get it. You can have both an ABLE account and a Special Needs Trust.

Learn more