The Professional's Guide to ABLE Accounts

Webinar date: November 5, 2026

Host: Jonathan I. Shenkman, President and Chief Investment Officer, ParkBridge Wealth Management (jonathan@parkbridgewealth.com)

Presenter: Amy C. O'Hara, Esq., CELA, Partner, Littman Krooks LLP (aohara@littmankrooks.com)

Welcome and Introduction

Jonathan Shenkman: Good morning, and welcome to the ParkBridge Wealth Management Fall Webinar Series. Today's program is entitled "The Professional's Guide to ABLE Accounts." My name is Jonathan Shenkman, and I am the President and Chief Investment Officer of ParkBridge Wealth Management. In that role, I serve in a fiduciary capacity to help my clients achieve their financial objectives.

The goal of my programs is to bring professionals together to help them better serve their clients. I do this by educating attendees on the latest topics in wealth planning and by encouraging collaboration among a client's attorney, CPA, and financial advisor where appropriate. I focus on working with high-net-worth families, businesses, and not-for-profits. I manage individual investment portfolios, trust accounts, corporate retirement plans, and endowments.

In addition to the 20 or so events I run every year, I write regularly on investing and financial planning. My work has appeared in Barron's, CNBC, Forbes, Kiplinger, The Wall Street Journal, and Trusts & Estates magazine, among others. My latest piece in Forbes is entitled "Retiring to a Tax-Free State? Your Real Savings Are Elsewhere." If you would like a link to that article, feel free to email me after the program.

Today, we are privileged to hear from Amy O'Hara of Littman Krooks, based in Westchester, New York. Amy is a partner at the firm and one of the nation's leading authorities on special needs planning, elder law, trusts and estates, guardianship, and fiduciary representation. As a Certified Elder Law Attorney, Amy helps individuals with disabilities, older adults, and their families navigate complex legal and financial planning challenges with confidence.

A nationally recognized speaker and author, Amy frequently lectures on special needs and elder law and co-authors the Special Needs Trust Handbook. She is a Fellow of the American College of Trust and Estate Counsel, past president of the Special Needs Alliance, and president of Westchester Disabled On the Move. She has been recognized by Best Lawyers in America and Super Lawyers. With that introduction, I will turn the program over to Amy.

What Is an ABLE Account?

Amy O'Hara: Thank you, Jonathan, for that kind introduction, and thank you for having me. The materials Jonathan circulated were prepared for an hour-long presentation, so I will skip a few slides geared toward attorneys. Today, I will cover the statutory framework of ABLE accounts, eligibility and contribution rules, and tax considerations. Time permitting, we will also discuss coordinating with supplemental needs trusts and planning strategies. I did not cut the materials, because I thought you should have the entire presentation. If you have questions, please reach out to me.

ABLE stands for the Achieving a Better Life Experience Act. An ABLE account is a tax-advantaged savings account that an eligible individual can use to save funds for the qualified disability expenses of the account's designated beneficiary. That is a mouthful, and I will break down each of those terms.

The ABLE Act became law about 12 years ago. It was first introduced in Congress in 2007 and had tremendous bipartisan and disability community support. Its purpose was to give personal autonomy to individuals who were capable of managing some spending money but were constrained by their reliance on government benefits.

It also offered a simpler alternative to a supplemental needs trust. However, as you will see, it is never meant to replace a supplemental needs trust, because ABLE accounts have many limitations. In the disability world, we view it as another tool in the toolbox.

Opening an ABLE account should also not be a knee-jerk decision made because a friend's child has one. It creates more paperwork, and if it is not necessary, it may not be worthwhile. When clients ask whether their child should have one, my answer is that it depends.

The federal authority for ABLE accounts is modeled after 529 college savings plans, which is why they appear in Section 529A of the Internal Revenue Code. New York has accompanying state legislation, and other states have their own.

Eligibility and Who Can Open an Account

Amy O'Hara: A designated beneficiary must be an eligible individual who is entitled to benefits based on disability or blindness under Social Security rules, meaning they receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI). Some individuals do not receive those benefits for various reasons. In that case, they can submit a disability certification that meets the criteria, and the disability or blindness must have occurred before age 46.

Three terms can be confusing: the eligible individual, the designated beneficiary, and the account owner. They are all the same person. If an individual is eligible for an ABLE account, they become both the designated beneficiary and the account owner.

Importantly, federal law permits only one ABLE account per eligible individual. I tell my clients to coordinate: if grandparents opened an ABLE account in Ohio, you cannot open another one in New York. Unlike 529 plans, where someone can have multiple accounts, an ABLE beneficiary can have only one.

Until this year, the disability had to begin before age 26. The ABLE Age Adjustment Act, part of SECURE 2.0, raised the age to 46. We usually associate SECURE 2.0 with retirement account changes, but this provision was added, reflecting the strong bipartisan support ABLE accounts enjoy. The change significantly expanded the eligible population, including veterans injured during active duty and individuals whose mental health disabilities were not diagnosed or did not present until later in life.

If the eligible individual has capacity, they can open the account themselves, or it can be opened by someone they select or by an agent under their power of attorney. If the individual lacks capacity, the order of priority is:

1. A legal guardian (in New York, under Article 17-A or Article 81; in other states, under the applicable guardianship statute)
2. A spouse
3. A parent
4. A sibling
5. A grandparent
6. A representative payee appointed by the Social Security Administration, usually a family member or sometimes an institution that handles the individual's SSI or SSDI payments

Contribution Rules

Amy O'Hara: Contributions can be made by anyone, including the account owner with their own funds, family, friends, and trusts, including third-party and first-party supplemental needs trusts. Contributions must be in cash. You cannot transfer stocks or bonds in kind, so a highly appreciated stock cannot be contributed directly.

Until H.R. 1, the One Big Beautiful Bill Act, the annual contribution limit was tied to the annual gift tax exclusion, which is $19,000 this year. H.R. 1 changed the inflation adjustment for ABLE accounts, so this year's ABLE limit is $20,000, a nice, even number. Our understanding is that it will remain at $20,000 next year.

An account owner with earned income can contribute more than $20,000 if they are employed and either their employer does not offer certain retirement plans or they are not eligible to participate. The additional amount is the lesser of the federal poverty line, which is $15,650 this year, or the account owner's income.

To illustrate: if a family member contributes $10,000, the account owner can contribute only another $10,000. However, if the account owner works and has no employer retirement plan, they can contribute an additional $15,650. Apart from that one exception, the $20,000 limit applies to contributions from all sources combined, including the individual, family members, trusts, and friends.

Many of my clients have children who could not pursue higher education because of their disability and have significant funds in 529 accounts. Those funds can be rolled over from a 529 plan to an ABLE account, up to the $20,000 annual limit. If a rollover uses the full $20,000, no other contributions can be made that year.

An ABLE account cannot exceed the state's 529 maximum, which is $520,000 in New York. Critically, if the account owner receives SSI (Supplemental Security Income, not Social Security Disability Insurance), the account is effectively capped at $100,000. Above that amount, SSI benefits are suspended.

A major advantage of ABLE accounts is that the assets do not count against eligibility for government benefits such as Medicaid and SSI, as long as the account does not exceed $100,000.

Qualified Disability Expenses and Distributions

Amy O'Hara: ABLE accounts are used for qualified disability expenses (QDEs). The statute gives examples, which include but are not limited to:

• Education
• Food
• Transportation
• Employment training and support
• Assistive technology and related services
• Health, including prevention and wellness
• Basic living expenses
• Financial management
• Legal fees
• Expenses for ABLE account oversight
• Funeral and burial expenses
• Housing

I won't go into housing today, but I have a couple of slides on it. Paying certain housing expenses from an ABLE account can avoid a reduction in SSI benefits. Special needs planners use this from time to time to minimize the one-third reduction that can apply when SSI recipients receive help with shelter costs.

QDEs are broadly construed. A distribution that is not for a QDE is still permitted, but the earnings may be subject to federal and state income taxes plus a 10% federal penalty tax. In practice, I am not aware of ABLE accounts being audited often. Each state reports distributions to the Social Security Administration and the Medicaid agency, and it is up to those agencies, or the IRS, to conduct any audit.

Timing of distributions also matters. Here is an example from New York's ABLE program. Annie, the account owner, withdraws $800 from her New York ABLE account on June 30 to pay her July rent. She deposits the $800 into her checking account on June 30 and withdraws it on July 3 to pay her landlord. This will cause a problem with her government benefits.

The agencies review ABLE expenditures on a calendar-month basis, for example June 1 through June 30, or July 1 through July 31. When a withdrawal from the ABLE account lands in the individual's checking account, it needs to be spent in the same month. Otherwise, it may create an income and asset issue for benefits purposes.

By contrast, Joe also withdraws $800 a month from his ABLE account. He withdraws it on May 3 to pay his May rent, and the payment clears on May 5. Because it all happens in the same month, there is no issue with his government benefits.

Depending on the program, you may be able to set up automatic payments directly from the ABLE account for certain expenses. These can take time to process, so it is sometimes easier to move funds into the checking account and pay the bill directly. It works much like a 529 plan. When my children were in college, I withdrew funds to my checking account because it cleared faster than having the 529 pay the college directly.

Be careful when advising clients on withdrawals. My materials include state resources and links. New York's ABLE program has a consumer-friendly website with helpful FAQs on distributions, and I direct many clients there.

Tax, Estate, and Gift Considerations

Amy O'Hara: Account earnings are free of federal and state income tax, provided withdrawals are used for qualified disability expenses. As I mentioned, withdrawals for non-qualified expenses are subject to federal and state income tax on the earnings portion only, plus a 10% penalty tax.

Here is an example. Katie saves $50,000 in her ABLE account over 10 years, and the account earns $10,000 in appreciation, for a total balance of $60,000. If Katie withdraws the $60,000 for a down payment on a condo, no taxes or penalties are due on the earnings.

There is some debate over whether a trip to Disney qualifies as a QDE, so let's assume it does not. If Katie withdraws $5,000 for a Disney trip, the earnings portion of that withdrawal is taxable income to her, plus a 10% penalty. If Katie is in the 10% tax bracket, this may be a non-issue. Individuals with ABLE accounts are often in low brackets, so the tax exposure is usually minimal.

Unlike some states' 529 plans, ABLE contributions are not deductible. For example, if my spouse and I contributed $10,000 to our son's New York 529 account, we could deduct it on our state income taxes. That rule does not apply to ABLE accounts. However, an employed account owner may qualify for the Saver's Credit.

For estate and gift tax purposes, there is no gift tax when the designated beneficiary funds their own account. It is not a completed gift, and the funds remain includable in their estate. If a third party, such as a parent, contributes $19,000, it is a completed gift that qualifies for the annual exclusion.

Note that parents often each give $19,000 to a child, for a combined $38,000 per child, as part of estate and gift tax planning. If one child has a disability and the parents want to fund an ABLE account, contributions are capped at $20,000. You cannot make two annual exclusion gifts to an ABLE account in the same calendar year. You also cannot use the five-year upfront gifting election available with 529 plans.

A few other rules:

• Investments in an ABLE account can be changed only twice a year.
• An ABLE account can be rolled over to another state's program, for example from Ohio to New York, once a year. Handle it carefully to avoid violating the one-account rule.
• If the account owner is no longer disabled, the account can continue, but no further contributions are permitted, and distributions are not QDEs and are therefore taxable. I have never seen this happen with a client, though it could arise with a mental health condition that resolves.

When the account owner dies, most states require Medicaid payback. Not all states do; I believe Pennsylvania does not. However, a New York client cannot join Pennsylvania's program to avoid payback, because that benefit is limited to its residents. New York does require Medicaid payback on ABLE accounts. This is why an ABLE account is not a substitute for a third-party supplemental needs trust and proper estate planning.

ABLE Accounts vs. Supplemental Needs Trusts

Amy O'Hara: In the few minutes remaining, let's compare ABLE accounts and supplemental needs trusts.

With a supplemental needs trust, you need an attorney who knows what they are doing. Never advise clients to use a form or a general estate planner's template. A couple of times a year, I take on a new client whose trust was not set up properly. ABLE accounts, by contrast, do not require a lawyer, which makes them attractive for individuals with modest funds who may not be able to afford an attorney.

When to Consider an ABLE Account

• To give a capable individual some autonomy, especially when they rely on SSI or limited earnings.
• To receive a modest windfall, such as a $20,000 settlement, a custodial account, or an inheritance, which can easily move into an ABLE account.
• For benefits planning to minimize a reduction in SSI.
• To give a capable beneficiary spending money. A trustee cannot give cash directly from a supplemental needs trust, but can move up to $20,000 into an ABLE account for the beneficiary to spend on qualified disability expenses.

Practice Tips and Resources

Amy O'Hara: In New York, the modifications section of the power of attorney allows us to add powers, so we include language permitting contributions to ABLE accounts. We also include language in our trust agreements permitting contributions to ABLE accounts. It is not required; a supplemental needs trust without that language can still make the distribution. My materials include a sample trust provision.

As I said at the beginning, your client does not need an ABLE account just because everyone else has one. It adds paperwork, and many families are already inundated. When it is needed, it is a fantastic tool.

Most states offer ABLE programs, and residents are not limited to their own state's program; a New York resident can join another state's plan. The ABLE National Resource Center is a wonderful organization for research and offers a state comparison tool to evaluate different programs.

I got through that in about 28 minutes. Thank you, Jonathan.

Closing Remarks

Jonathan Shenkman: Thank you so much, Amy. If anyone has specific questions, new business opportunities, or other issues to discuss, please reach out directly to Amy or me where appropriate. I will include her contact information in the follow-up email.

Three quick items before I let you go:

1. My next webinar is on Thursday, November 19, at 8:30 a.m. The topic is "Sports Franchises and SLATs: A Timely Planning Opportunity," featuring Jay Scharf and Joshua Glazer of McDermott Will & Schulte, based in Boca Raton, Florida. I will send the invitation in the coming days. In the meantime, friends or colleagues who would find these webinars of interest can subscribe at parkbridgewealth.com/webinar.
2. You can follow my work on X, Instagram, and YouTube at @JonathanIMoney, and by connecting with me on LinkedIn. I post several times a week.
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This concludes today's session. Please stay safe and healthy, and have a wonderful day.