ABLE Accounts

Arizona launched its ABLE program in March 2018. In 2023, ABLE allows contributions of up to $17,000 per year. If the individual with the disability is working but there is no defined contribution plan such as a 401(K) plan or the individual does not qualify to make contributions to the plan, the individual can contribute the lesser of the individual's gross income in that taxable year or $13,590 in addition to the annual $17,000 while still protecting eligibility for government benefits, such as Supplemental Security Income and ALTCS.

The money can be used for expenses related to maintaining and improving health status, independence and quality of life. And as long the money is used for qualified expenses, earnings on the account are not subject to state or federal income taxes.

What is ABLE?

The Stephen Beck Jr. Achieving a Better Life Experience Act, ABLE for short, was passed in 2014 recognizing that special needs individuals incur significant costs beyond those covered by insurance and other benefits. These savings accounts are for people considered disabled before age 26.

The law provides a limited exception to rules that cut off aid to individuals with more than $2,000 in assets.

It is up to the states to set up and regulate ABLE accounts, which Arizona and many other states have done. Some states allow nonresidents to apply for their programs.

Arizona ABLE Facts

  • ABLE investment accounts, also referred to as STABLE accounts, can be opened online by the disabled individual or by someone else on behalf of the special needs person.
  • Under certain circumstances, disabled persons who are employed may contribute up to $13,590 of their earned income to the account. That amount also may be eligible for the federal Saver’s Credit.
  • Friends and relatives may contribute as well, but that amount is limited to $17,000 annually, including any money that comes from the disabled person’s benefits or other unearned income. That makes a possible total of $30,590 per year.
  • A lifetime limit of $482,000 also applies.
  • SSI may be suspended if the account total hits $100,000, with eligibility kicking back in if the amount drops below that threshold. DDD and ALTCS benefits are not impacted.
  • There is a payback requirement for state Medicaid funds after the disabled person’s death if any funds remain in the account.
  • A minimum of $25 is needed to open an account with a choice of five investment options, four based on mutual funds, one FDIC insured. As of July 2018, there was a $3.50 monthly fee and asset-based fees of between 0.19 and 0.33 percent depending on the investment option chosen. Investment options can be changed twice a year. There is also a $10 per year fee for paper statements when you choose to opt out of electronic statements and $25 fee if a transfer fails or a check bounces.
  • Click here to begin the process: https://az-able.com

Who Qualifies?

  • You must be a state resident to qualify for Arizona ABLE, however, you can join a program from another state that allows non-resident participation as long as you have only one account.
  • Although you can open an account at any age, you must have been affected by the disability before turning 26. Effective on December 31, 2025, the age for disability increases to 46 years of age to qualify for an ABLE account.
  • If you receive disability benefits such as SSI, you likely will qualify for ABLE. Those who don’t receive such benefits can go through a self-certification process.

How are Expenses Handled?

  • Withdrawals requests are filed online and can be electronically transferred to a STABLE debit card or bank account, or a check can be issued to the person or to a third party for qualified expenses. Funds should be used promptly so SSI benefits are not impacted. Detailed records should be kept in case the IRS requires verification.
  • Qualified expenses include education, housing and related expenses, transportation, employment training, assistive technology, personal support services, financial management, legal fees, and other IRS-approved costs that improve health, independence and quality of life.

Factors to Consider

  • Non-qualified withdrawals are subject to tax on the earnings plus a 10 percent surtax.
  • Investment options and rules surrounding ABLE accounts vary by state. So you may want to explore options in addition to the Arizona program.
  • Consider, for example, required documentation, minimum contributions, fees, withdrawal restrictions, risks and upsides of investment options, and value-added options such as state tax breaks, financial planning assistance, a rewards program, and debit card options.

ABLE vs. Special Needs Trusts

A person can have both an ABLE account and a special needs trust. Each has distinct advantages. For example, the trust has no contribution limit or restrictions on how money is spent. ABLE accounts have tax advantages and are easier and less expensive to open. With few exceptions, funds remaining in an ABLE account on the death of the beneficiary must be paid back to the Medicaid program(s) that provided benefits. A third-party special needs trust (one that is part of your estate plan) does not have a payback requirement to Medicaid.

Click here for more information on special needs trusts.

Other Helpful Connections

  • Other state ABLE programs: www.ablenrc.org.
  • Saver’s Credit information: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit
  • Arizona Department of Economic Security ABLE assistance: 800-439-1653 or team@stableaccount.com