G.64.2 ABLE Accounts

Certified Financial Planner CFP

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1 A. Professional Conduct and Regulation

A.1 Code of Ethics and Standards of Conduct A.1.1 The Six Ethical Principles A.2 Procedural Rules and Discipline A.2.1 Fitness Standards for Candidates A.3 Financial Institutions Overview A.3.1 Broker-Dealers vs. RIAs A.4 SEC and Securities Regulation A.4.1 FINRA and Broker-Dealer Regulation A.4.2 State Securities Regulation A.5 Consumer Protection Laws A.5.1 Privacy and Confidentiality Requirements A.6 Fiduciary Duty and Application

2 B. General Principles of Financial Planning

B.7 The Financial Planning Process B.7.1 Establishing the Client Relationship B.7.2 Gathering Client Data and Goals B.8 Personal Financial Statements B.8.1 Key Financial Ratios B.9 Cash Flow Management B.9.1 Emergency Fund Planning B.10 Debt Management Strategies B.10.1 Mortgage and Home Financing B.11 Economic Concepts B.11.1 Planning for Inflation B.12 Time Value of Money Concepts B.12.1 TVM Calculations and Applications B.12.2 Loan Amortization B.13 Education Needs Analysis B.14 Education Savings Vehicles B.14.1 529 Plans In-Depth B.15 Education Funding Strategies B.16 Gift/Income Tax Strategies

3 C. Risk Management and Insurance Planning

C.17 Principles of Risk and Insurance C.17.1 Risk Management Process C.18 Analysis of Risk Exposures C.19 Health Insurance Fundamentals C.19.1 Types of Health Insurance Plans C.20 Disability Income Insurance C.20.1 Disability Policy Features C.21 Long-Term Care Insurance C.22 Annuities Overview C.22.1 Fixed vs. Variable Annuities C.23 Life Insurance Fundamentals C.23.1 Types of Life Insurance C.24 Business Owner Insurance Solutions C.25 Insurance Needs Analysis C.26 Insurance Policy and Company Selection

4 D. Investment Planning

D.27 Equity Securities D.27.1 Fixed Income Securities D.27.2 Mutual Funds and ETFs D.27.3 Taxation of Investment Vehicles D.28 Systematic Risk D.28.1 Unsystematic Risk D.29 Economic and Market Cycles D.30 Measures of Risk and Return D.30.1 Investment Performance Measures D.31 Asset Allocation Strategies D.31.1 Portfolio Diversification D.32 Bond and Stock Valuation D.32.1 Stock Valuation Models D.33 Investment Policy Statement D.33.1 Modern Portfolio Theory D.34 Active vs. Passive Investing D.34.1 Common Investment Strategies D.35 Alternative Investments D.35.1 Options and Derivatives

5 E. Tax Planning

E.36 Income Tax Fundamentals E.36.1 Filing Status and Tax Brackets E.37 Types of Income E.37.1 Deductions and Credits E.37.2 Capital Gains and Losses E.38 Business Entity Taxation E.38.1 Self-Employment Tax E.39 Taxation of Trusts and Estates E.40 Tax Reduction Strategies E.40.1 Retirement Account Tax Strategies E.41 Property Transactions E.41.1 Basis Rules for Acquired Property E.42 AMT and NIIT E.42.1 Special Tax Situations E.43 Charitable Giving Strategies

6 F. Retirement Savings and Income Planning

F.44 Retirement Needs Analysis F.44.1 Sources of Retirement Income F.45 Social Security Benefits F.45.1 Social Security Claiming Strategies F.45.2 Medicare Planning F.46 Eldercare and Special Needs Planning F.47 Qualified Plan Overview F.47.1 Defined Benefit Pension Plans F.47.2 Defined Contribution Plans F.48 Eligibility and Vesting F.48.1 Coverage and Discrimination Testing F.48.2 Contribution and Benefit Limits F.48.3 401(k) Plan Features F.49 Non-Qualified Deferred Compensation F.49.1 Executive Compensation Plans F.50 Retirement Plan Selection for Businesses F.50.1 Individual Retirement Accounts F.51 Distribution Rules F.51.1 Required Minimum Distributions F.52 Retirement Income Strategies F.52.1 Tax-Efficient Withdrawal Strategies F.53 Business Succession Planning

7 G. Estate Planning

G.54 Property Titling and Beneficiary Designations G.54.1 Beneficiary Designations G.55 Strategies to Transfer Property G.55.1 Lifetime Gifting Strategies G.56 Wills and Estate Documents G.56.1 Powers of Attorney G.56.2 Advance Directives and Healthcare Documents G.57 Federal Gift Tax G.57.1 Federal Estate Tax G.57.2 Generation-Skipping Transfer Tax G.58 Sources for Estate Liquidity G.58.1 Life Insurance for Estate Liquidity G.59 Trust Fundamentals G.59.1 Revocable Living Trusts G.59.2 Irrevocable Trusts G.59.3 Trust Income Taxation G.60 Marital Deduction Planning G.60.1 QTIP Trusts G.60.2 Portability of Estate Tax Exemption G.61 Intra-family and Business Transfer Techniques G.61.1 Family Limited Partnerships G.61.2 GRATs and IDGTs G.62 Postmortem Estate Planning Techniques G.62.1 Disclaimer Planning G.62.2 Estate Tax Elections G.63 Planning for Divorce and Unmarried Couples G.63.1 Estate Planning for Unmarried Couples G.63.2 Planning for Blended Families G.64 Planning for Special Needs and Circumstances G.64.1 Special Needs Trusts G.64.2 ABLE Accounts

8 H. Psychology of Financial Planning

H.65 Client and Planner Attitudes, Values, Biases H.65.1 Money Scripts and Money Attitudes H.65.2 Planner Self-Awareness H.66 Behavioral Finance H.66.1 Cognitive Biases H.66.2 Emotional Biases H.66.3 Heuristics and Mental Accounting H.67 Sources of Money Conflict H.67.1 Couples and Money Conflict H.67.2 Family and Intergenerational Money Conflict H.68 Principles of Counseling H.68.1 Therapeutic Techniques in Financial Planning H.68.2 Professional Boundaries and Referrals H.69 General Principles of Effective Communication H.69.1 Listening and Questioning Skills H.69.2 Managing Difficult Conversations H.69.3 Non-Verbal Communication H.70 Crisis Events with Severe Consequences H.70.1 Death and Divorce H.70.2 Job Loss and Health Crisis H.70.3 Sudden Wealth and Sudden Loss H.70.4 Natural Disasters and Traumatic Events

G.64.2 ABLE Accounts

Key Takeaways Explain This Topic AI

ABLE accounts allow tax-free savings for qualified disability expenses

Disability onset before age 46 (effective 2026, previously age 26)

Annual contribution limit: $19,000 (2025) / $20,000 (2026)

First $100,000 excluded from SSI resource limits; Medicaid not affected by any amount
Last updated: October 2026

ABLE Accounts (Achieving a Better Life Experience)

ABLE accounts, created by the Achieving a Better Life Experience Act of 2014, provide a tax-advantaged savings option for individuals with disabilities. These accounts allow people with disabilities to save money without jeopardizing their eligibility for Supplemental Security Income (SSI), Medicaid, and other means-tested benefits. For CFP professionals, ABLE accounts represent a simpler, more accessible alternative to special needs trusts for many disability planning situations.

ABLE Account Basics

What is an ABLE Account?

An ABLE account is a state-sponsored, tax-advantaged savings account similar to a 529 college savings plan. Key characteristics:

Tax-free growth : Earnings accumulate tax-free
Tax-free withdrawals : Distributions for qualified disability expenses are not taxed
SSI protection : First $100,000 is excluded from SSI's $2,000 resource limit
Medicaid protection : Account balance does not affect Medicaid eligibility regardless of amount
Account owner control : The individual with disabilities (or their representative) controls the account
2025-2026 Contribution Limits

Year Annual Contribution Limit ABLE-to-Work Additional Contribution Maximum Total (Working Individuals)
2025 $19,000 Up to $15,650 (continental U.S.) $34,650
2026 $20,000 Up to $15,650* (continental U.S.) $35,650

*ABLE-to-Work additional contributions are available to employed individuals who do NOT participate in an employer-sponsored retirement plan. Alaska and Hawaii have higher limits ($19,550 and $17,990 respectively).

Lifetime Limit : Total account balance cannot exceed the state's 529 plan limit, which ranges from approximately $235,000 to $596,925 depending on the state plan.

Eligibility Requirements
Age of Onset Requirement
Rule through 2025 : Disability must have occurred before age 26
Since January 1, 2026 : Disability must have occurred before age 46

This expansion under the ABLE Age Adjustment Act significantly increases the eligible population by over 6 million people, including:

Veterans injured during military service (average medical retirement age: 34-39)
Adults with mental health conditions developed in adulthood
Individuals with chronic illnesses or injuries acquired later in life
Qualifying Disability

The individual must meet one of the following criteria:

SSA Beneficiary : Currently receiving SSI or SSDI benefits based on disability

Disability Certification : If not receiving SSI/SSDI, the individual can self-certify that they have:

A medically determinable physical or mental impairment
That results in "marked and severe functional limitations"
That has lasted or is expected to last at least 12 months, or results in death

Important : An individual does NOT need to be receiving benefits to be ABLE-eligible. Employment status and income have no effect on eligibility.

Qualified Disability Expenses (QDEs)

ABLE funds can be used tax-free for expenses related to the beneficiary's disability that help maintain or improve health, independence, or quality of life.

Categories of Qualified Expenses

Category Examples
Education Tuition, books, supplies, tutoring, special education services
Housing Rent, mortgage, property taxes, utilities, home modifications
Transportation Vehicle purchase/modifications, public transit, ride services
Employment Support Job coaching, vocational training, work-related expenses
Health & Wellness Medical expenses, therapies, mental health services, fitness
Assistive Technology Computers, adaptive equipment, communication devices
Personal Support Caregivers, personal attendants, respite care
Financial Management Legal fees, financial planning, account management
Funeral & Burial Pre-paid funeral expenses, burial costs
Basic Living Expenses Food, clothing, personal care items

Broad Interpretation : The IRS interprets QDEs broadly. An expense qualifies if it relates to the individual's blindness or disability and helps maintain or improve their health, independence, or quality of life. The expense does NOT need to be "medically necessary."

Non-Qualified Withdrawals

If funds are used for non-qualified expenses:

The earnings portion is subject to regular income tax
An additional 10% penalty applies to the earnings
The distribution may be counted as income for SSI purposes
Impact on Government Benefits
Supplemental Security Income (SSI)

ABLE Account Balance SSI Impact
$0 - $100,000 Excluded from $2,000 resource limit
Over $100,000 SSI benefits suspended (not terminated) until balance drops below $100,000

Important Distinction : When SSI is "suspended" (not terminated), benefits automatically resume when the account balance drops below $100,000. The individual does not need to reapply.

Medicaid
ABLE account balances are completely excluded from Medicaid resource calculations
There is no $100,000 limit for Medicaid purposes
Even if SSI is suspended due to ABLE balance over $100,000, Medicaid continues
Medicaid Payback at Death

Upon the death of the ABLE account beneficiary:

Any state Medicaid agency that provided benefits may file a claim against remaining ABLE funds
The payback applies only to Medicaid benefits paid after the ABLE account was established
Payback occurs after payment of all outstanding QDEs
Any remaining funds (after Medicaid payback) pass to the beneficiary's estate

Comparison to SNTs : Both first-party SNTs and ABLE accounts have Medicaid payback provisions, but third-party SNTs do not.

Tax Advantages
Federal Tax Benefits
No deduction for contributions : Unlike traditional retirement accounts
Tax-free growth : Earnings accumulate without annual taxation
Tax-free distributions : Withdrawals for QDEs are completely tax-free
Gift tax treatment : Contributions are treated as completed gifts eligible for annual exclusion
State Tax Benefits

Many states offer additional tax benefits:

State income tax deductions for contributions
State tax-free treatment of earnings and distributions
Some states match contributions for low-income beneficiaries
529 Plan Rollovers

Families with unused 529 college savings plan funds can roll those funds into an ABLE account:

Rollover Rules

Rule Requirement
Relationship 529 beneficiary must be same person as ABLE beneficiary, or a family member
Contribution limit Rollover counts toward annual ABLE contribution limit ($20,000 for 2026)
Tax treatment Tax-free if completed within 60 days
Permanence 529-to-ABLE rollovers are now permanent (previously set to expire)

Example : Parents saved $50,000 in a 529 plan for their child who has a disability and will not attend college. They can roll over $20,000 per year (2026 limit) from the 529 to an ABLE account, tax-free.

ABLE vs. Special Needs Trust Comparison

Feature ABLE Account First-Party SNT Third-Party SNT
Annual contribution limit $20,000 (2026) None None
Total balance limit State 529 limit ($235K-$597K) None None
Setup complexity Easy (online enrollment) Complex (legal documents, possibly court) Moderate (legal documents)
Ongoing costs Low (typically 0.3-0.5% annually) Higher (trustee fees, accounting, legal) Moderate to higher
Account owner control Beneficiary manages account Trustee makes decisions Trustee makes decisions
SSI exclusion limit $100,000 Unlimited Unlimited
Medicaid payback Yes Yes No
Age restriction Onset before 46 (2026+) Establishment before 65 None
Investment options Limited menu (like 529) Trustee discretion (broad) Trustee discretion (broad)
When to Use ABLE vs. SNT

ABLE Account is Best For:

Smaller amounts (under the annual contribution limit)
Beneficiaries who want control over their own funds
Day-to-day disability expenses
Employment income savings
Families seeking simplicity and low costs
Younger beneficiaries building savings over time

Special Needs Trust is Best For:

Large sums (lawsuit settlements, substantial inheritances)
Amounts exceeding ABLE annual or lifetime limits
When avoiding Medicaid payback is important (third-party SNT)
Complex family situations requiring trustee oversight
Beneficiaries who cannot manage their own finances
Using Both Together

Many families use both an ABLE account and an SNT:

SNT : Holds large assets, pays for major expenses, managed by trustee

ABLE account : Receives annual rollovers from SNT, gives beneficiary independence for daily spending, serves as a "spending account"

This combination provides the best of both worlds: professional oversight for significant assets and personal autonomy for routine expenses.

State ABLE Programs

Each state (or consortium of states) operates its own ABLE program, but individuals can open accounts in any state's program. Considerations when choosing:

Investment options : Range and quality of investment choices
Fees : Annual maintenance fees and investment expense ratios
State tax benefits : Deductions available only for in-state contributions in some states
Debit card access : Some programs offer ABLE debit cards for easy spending
Online tools : Account management features and mobile apps