You may be wondering, “How should someone go about spending ABLE Account Money?”
An ABLE Account (Achieving a Better Life Experience Account) is tax-advantaged savings available to individuals diagnosed with disabilities. ABLE Accounts lets a person who needs to have low income or assets shelter a limited amount without putting their public benefits at risk.
The account owner, family members, friends, trusts, or any other person may contribute to the ABLE account may be made by, as explained in the article “What Qualifies as Eligible Expenses for an ABLE Account?” Investopedia. The money can be maintained in the account tax-free or spent on specific expenses, which are called “eligible expenses” or “Qualified Disability Expenses” (QDEs) and cover a broad range of goods and services. It is sometimes simple to figure out if an expense meets the criteria. However, in others, it is not so clear.
Typical QDEs include education, employment training, food, shelter, transportation, assistive technology, health, prevention and wellness, financial management of the ABLE account, including oversight and monitoring, legal fees, and funeral and burial expenses. Gifts to others would not be a good idea from such an account.
When spending ABLE account money, keep a detailed record if a dispute arises about whether an expense qualifies. That means receipts or debit records are strongly preferable to cash expenditures.
The law governing ABLE accounts does not spell out every single QDE. Sometimes the IRS or Social Security Administration will issue guidance to clarify whether an item is a QDE. The law says the term should be “broadly constructed to permit the inclusion of basic living expenses and should not be limited to items for which there is a medical necessity, or which provides no benefits to others in addition to the benefit to the eligible individual.”
Note that when spending ABLE account money, a vacation would be acceptable if it helps maintain or improve the health, independence, or quality of life of the disabled individual. Have you ever taken a vacation that wouldn’t fit that bill?
The food category includes more than groceries: food delivery and restaurant meals are included.
A few tips:
- If in doubt, use non-ABLE money and save the ABLE funds for eligible purchases.
- Use public funds when possible. For instance, Medicaid may pay for transportation to a health care provider or educational programs.
- Keep extensive records, especially for questionable items.
It is great for disabled individuals to have this much flexibility. However, it can also be confusing. An elder law estate planning attorney will be familiar with the guidelines and help ensure that the funds are used properly.
Reference: Investopedia (Feb. 25, 2022) “What Qualifies as Eligible Expenses for an ABLE Account?”