“Funding an ABLE can come with both current and future tax incentives,” said Todd A. Reckamp, vice president and wealth advisor at Bryn Mawr Trust. “Many clients make lifetime annual gifts into ABLE accounts to take advantage of this opportunity for tax-free growth and to shrink their eventual federal estates.”
There are restrictions on ABLEs. “Each child can only have one ABLE account for their benefit and states may have maximum balances,” Rudegeair said, adding that in some states, at the end of the individual’s life remaining funds must also reimburse the state for benefits.
(The ABLE National Resource Center details each state’s program. Some states offer additional tax benefits for those who use their home state’s plan.)
The Tax Cuts and Jobs Act impacted ABLEs in a good way, Caruso said, including potential Saver’s Credits for a percentage of contributions. According to the IRS, employed beneficiaries can now make additional contributions and more rollovers are possible between ABLEs and 529 plans.