ABLE Account Basics for Your Special Needs Child

Authorized by the Achieving a Better Life Experience (ABLE) Act of 2014, these accounts can be a helpful resource people who need disability benefits. ABLE accounts can be complex making them intimidating – in addition to new Internal Revenue Service (IRS) regulations being issued often – so the content here will inform about what these accounts are and the most recent IRS rulings issued. 

An individual must be a U.S. citizen or legal resident with a significant disability that began before age 26 to be considered eligible for an ABLE account. Once determined eligible, they are termed the “designated beneficiary” of the ABLE account. While eligibility is contingent upon the disability happening before age 26, the account can be opened at any age.

The individual is also eligible to open an ABLE account if they receive Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI); if they are not receiving SSI or SSDI, they need a disability certification from a doctor and meet the Social Security Administration’s definition of significant functional limitation.

An eligible designated beneficiary is limited to only one ABLE account.

Who can Contribute to an ABLE Account and How Much Can One Contribute?

Any may contribute to an ABLE Account, whether it be the account owner, the designated beneficiary, or their family or friends.

In Illinois, the annual limit for each contributor is $16,000. Designated beneficiaries can contribute more than the annual limit to their ABLE account if determined eligible to do so. The Tax Cuts and the Jobs Act allows for beneficiaries to contribute the amount equal to their state’s poverty limit or the federal poverty line, whichever is less.



This additional contribution does not apply, however, if the designated beneficiary’s employer contributes to a workplace retirement plan. Additionally, some states have lifetime caps on ABLE accounts, so be sure to consider this as well. 

What Are the IRS Regulations?

As of October 2020, the IRS issued amendments to 26 CFR parts 1, 25, 26, and 301. This authorized states to create ABLE account programs under section 529A of the Internal Revenue Code.



Some important outcomes of the regulations are:

• Any payments to eliminate outstanding debt or disability or burial-related expenses from the ABLE account are not included in the designated beneficiary’s states after their death.

• A changed of designated beneficiary is not treated as a distribution if the successor beneficiary is an eligible individual and a family member of the designated beneficiary. Any “sibling, whether by blood or adoption… brother, sister, stepbrother, stepsister, half-brother and half-sister” qualifies as a member of the family.



• Funds from qualified tuition programs (529 plans) may be rolled over into ABLE accounts.

Newer regulations that were effective as of January 1, 2021 were:

• If a contribution is a nontaxable gift for Federal gift tax purposes, the inclusion ratio for GST-tax purposes will be zero.
• Contributions to an ABLE account, other than a designated beneficiary’s contribution, are considered a completed gift for gift tax purposes.
• Funds in the ABLE account are included in the designated beneficiary’s estate for estate tax purposes.

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