Many parents ask, “Can my adult child with a disability have a savings account without losing SSI or Medicaid?” The answer is yes, and an Alabama ABLE Account may be the solution.
Perhaps your son has started working part-time and wants to save for a reliable vehicle. Maybe your daughter has received monetary gifts from family members over the years, and you’d like her to have a savings account in her own name. Or perhaps you’re simply thinking ahead and wondering how to help your adult child become more financially independent.
Unfortunately, traditional savings accounts can create unintended consequences for individuals who receive Supplemental Security Income (SSI) or Medicaid. Because these programs have strict asset limits, accumulating even a modest amount of savings could affect eligibility for the benefits they depend on.
Fortunately, there is a solution designed specifically for this situation. Alabama ABLE accounts offered through the Alabama EnAble Savings Plan, allow many individuals with disabilities to save money for disability-related expenses while protecting eligibility for important government benefits.
Although many families first hear about ABLE accounts when their child is young, these accounts are often even more valuable once a child reaches adulthood. As part of a comprehensive special needs planning strategy, an ABLE account can provide greater financial flexibility while supporting long-term independence.
What Is an Alabama ABLE Account?
ABLE stands for Achieving a Better Life Experience, a federal program established through the ABLE Act of 2014. The law created tax-advantaged savings accounts that allow eligible individuals with disabilities to save money without jeopardizing certain means-tested government benefits.
In Alabama, the state’s ABLE program is called the Alabama EnAble Savings Plan.
Unlike a traditional savings account, an ABLE account for adults with disabilities offers several important advantages:
- Investment earnings grow tax-free.
- Qualified withdrawals are also tax-free.
- Parents, grandparents, friends, employers, and others may contribute to the account.
- The beneficiary generally owns and controls the account, or it may be managed by an authorized legal representative.
- Savings generally do not count toward SSI and Medicaid asset limits, subject to applicable rules.
As of 2026, the annual contribution limit generally follows the federal gift tax exclusion amount, which is $19,000 per year. In some circumstances, employed beneficiaries may be able to contribute additional funds under the ABLE to Work Act. Because contribution limits are adjusted periodically, families should verify the current IRS limit before making contributions.
Another important benefit is that up to $100,000 in an ABLE account is excluded from SSI resource calculations, allowing eligible individuals to build meaningful savings without immediately affecting their SSI eligibility.
Who Qualifies for an ABLE Account?
One of the most common misconceptions about ABLE accounts is that they’re only available to children or young adults. Fortunately, that’s not the case.
There is no maximum age for opening an ABLE account. Instead, eligibility depends primarily on when the individual’s disability began.
Beginning in 2026, federal law expanded eligibility. In general, an individual may qualify if:
- Their disability began before age 46.
- They meet the Social Security definition of disability, or have a qualifying diagnosis certified by a licensed physician.
- They satisfy the eligibility requirements established under the federal ABLE Act.
Importantly, an individual does not need to currently receive SSI or Social Security Disability Insurance (SSDI) to qualify. They simply need to meet the disability eligibility requirements.
For many Alabama families, this expanded eligibility means an adult child who previously thought they had “aged out” may now qualify for an ABLE account.
What Can ABLE Account Funds Be Used For?
ABLE accounts are designed to improve the beneficiary’s health, independence, and quality of life, not just pay medical bills.
Funds may be used for a wide variety of qualified disability expenses, including:
- Education
- Housing
- Transportation
- Employment training and support
- Assistive technology
- Personal support services
- Health, prevention, and wellness expenses
- Financial management services
- Legal fees
- Funeral and burial expenses
- Other disability-related expenses that enhance the beneficiary’s quality of life
This broad definition gives families considerable flexibility while ensuring the funds continue serving their intended purpose.
As long as withdrawals are used for qualified disability expenses, they remain tax-free.
If money is withdrawn for non-qualified expenses, however, the earnings portion of the withdrawal may be subject to income tax as well as a 10% federal tax penalty. Keeping good records can help avoid unnecessary tax consequences.
How an ABLE Account Affects Government Benefits
For many families, this is the most important aspect of an ABLE account. The program was specifically created to allow individuals with disabilities to build savings without automatically losing means-tested government benefits.
Supplemental Security Income (SSI)
Normally, SSI recipients cannot have more than $2,000 in countable assets.
An ABLE account provides an important exception.
The first $100,000 in an ABLE account is excluded from SSI resource calculations. If the account balance exceeds $100,000, SSI cash benefits are generally suspended, not terminated, until the account balance falls below the threshold again.
This allows many individuals to accumulate meaningful savings while preserving eligibility for SSI.
Medicaid
In most situations, money held in an ABLE account does not affect Medicaid eligibility.
However, families should understand that federal law allows states to seek reimbursement for certain Medicaid expenses from funds remaining in an ABLE account after the beneficiary’s death. This is commonly referred to as Medicaid estate recovery or a Medicaid payback provision.
Because these rules can be complex, families should discuss their circumstances with an attorney familiar with Alabama Medicaid planning.
Social Security Disability Insurance (SSDI)
Unlike SSI, SSDI is not a means-tested benefit.
Because SSDI eligibility is based primarily on work history and disability, not financial resources, money held in an ABLE account generally does not affect SSDI benefits.
Understanding the distinction between SSI and SSDI is important, as the programs have very different eligibility rules.
Special Needs Trust vs. ABLE Account: What’s the Difference?
Many parents have heard about Special Needs Trusts and wonder whether they should establish a trust or open an ABLE account.
The answer is often that both tools can play an important role.
ABLE accounts are generally:
- Easier and less expensive to establish
- Managed directly by the beneficiary or an authorized representative
- Well suited for everyday disability-related expenses
- Subject to annual contribution limits and the $100,000 SSI resource exclusion threshold
Special Needs Trusts, on the other hand:
- Can hold substantially larger amounts of money
- Are commonly used for inheritances, lawsuit settlements, or life insurance proceeds
- Require a trustee to manage the assets
- Provide greater flexibility for long-term asset protection
Rather than choosing one over the other, many families benefit from incorporating both into a comprehensive estate plan for a loved one with disabilities.
An experienced Alabama estate planning attorney can help determine which combination of planning tools best supports your family’s goals.
How to Open an Alabama ABLE Account
Opening an Alabama ABLE account is generally a straightforward process.
Most families will:
- Confirm the beneficiary meets the eligibility requirements.
- Gather documentation, such as an SSI or SSDI award letter or physician certification, if needed.
- Complete the online enrollment through the Alabama EnAble Savings Plan.
- Make the required initial contribution, which is currently $50.
- Continue funding the account with future contributions, which generally may be as little as $25 depending on the funding method selected.
If the beneficiary is unable to manage the account independently, a parent with appropriate legal authority, a guardian, conservator, or someone acting under a valid power of attorney may establish and manage the account on the beneficiary’s behalf.
While opening an ABLE account is relatively simple, coordinating it with powers of attorney, guardianship documents, trusts, and other estate planning documents can help ensure everything works together effectively.
Important Considerations and Limitations
Although ABLE accounts provide valuable benefits, they are only one piece of a comprehensive special needs planning strategy.
Families should keep several important considerations in mind.
Annual contribution limits apply and may change from year to year.
In addition, remaining funds in an ABLE account may be subject to Medicaid estate recovery after the beneficiary’s death for certain Medicaid benefits paid after the account was established.
Families should also remember that while ABLE accounts help preserve eligibility for SSI and Medicaid in many situations, other assistance programs, such as housing assistance or SNAP benefits, may have different eligibility rules that should be reviewed individually.
Finally, an ABLE account should not replace comprehensive estate planning. Instead, it should be coordinated with wills, trusts, powers of attorney, beneficiary designations, and other planning tools to help ensure your loved one remains financially secure for years to come.
The information provided here is intended for general educational purposes and should not be considered legal advice. Every family’s circumstances are unique, and speaking with an attorney familiar with Alabama law can help you determine the most appropriate course of action.
Helping Your Adult Child Build Financial Independence
For many adults with disabilities, building financial independence has traditionally been difficult because even modest savings could place essential benefits at risk.
The Alabama EnAble Savings Plan provides families with a practical way to save for the future while preserving eligibility for programs like SSI and Medicaid.
Whether your adult child is beginning a career, receiving financial gifts from loved ones, or preparing for greater independence, an ABLE account may be an important part of a coordinated long-term plan.
At Miller Estate & Elder Law, we help Alabama families understand how ABLE accounts, Special Needs Trusts, Medicaid planning, and estate planning strategies work together to protect loved ones with disabilities throughout every stage of life.
If you’d like to learn whether an ABLE account is the right fit for your family’s long-term planning goals, contact Miller Estate & Elder Law to schedule a consultation. We’ll help you develop a personalized plan that protects your loved one, preserves valuable benefits, and provides greater peace of mind for the future.
