ABLE Accounts in California: An Overview

An ABLE account is a bank account that permits those with special needs to save money at the state level. It gets its name from the federal law, Achieving a Better Life Experience (ABLE) Act.

California was slower to establish ABLE accounts, but they were signed into law in 2015. However, California has struggled to put the ABLE accounts in motion thus far. The program is expected to be in “full force” in the winter of 2018.

Before this law was signed and placed into effect, individuals with disabilities were not permitted to save more than $2,000 in assets without undermining their ability to qualify for federal disability benefits.

The Basics of CalABLE Accounts

ABLE accounts in California often referred to as CalABLE Accounts, allow certain individuals who qualify to open a tax-free savings account that will not put their ability to be eligible for government assistance in jeopardy. Before this law was passed, those with disabilities and their families were much more restricted in how much money they could save and still qualify for government benefits.

Loved ones and the disabled individual who owns the account can contribute up to $14,000 per year. They can also save $100,000 in total without losing public assistance, including supplemental security income. This account can grow tax-free, as long as the earnings are spent on qualified expenses.

Who Can Open an ABLE Account?

Anyone who has a disability before the age of 26 can open an ABLE account, as long as they either:

  • Receive benefits based on a disability (such as from the Social Security program) or
  • Have a disability certification, which includes a copy of the diagnosis signed by a physician.

What Are Qualified Disability Expenses?

Money from ABLE Accounts can only be used for expenses related to blindness or disability. This definition is very inclusive, however. It includes things like:

  • Housing
  • Transportation
  • Education
  • Employment training
  • Healthcare
  • Financial management
  • Legal fees

In fact, virtually any expense related to the disabled individuals’ necessities will be considered a qualifying expenditure.

Special Needs Trusts and ABLE Accounts

Until ABLE accounts are up and running in California, those with disabilities and their families can continue to establish and use special needs trusts to save.

However, special needs trusts need to be controlled by a trustee, which can be unnecessary in some situations. For those who may have a disability but still want to manage their own finances, a special needs trust may not be a good option. Instead, an ABLE account can be a good compromise.

Getting Legal Help with ABLE Accounts

If you have a special needs loved one or if you are a special needs individual, you may need to establish a means to save without undermining your ability to get disability benefits. An ABLE account can be a good solution, but a special needs trust may still be helpful as well. Contact Biddle Law to set up a consultation to determine which option will work best for your individual situation.