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Question:

I wonder if money from an ABLE account could be used to pay rent for a disabled child while they are waiting for public housing or a Section 8 voucher.

Response:

Yes, an ABLE account can be used to pay for rent. Housing costs are classified as a qualified disability expense (QDE).

ABLE accounts, named after the Achieving a Better Life Experience Act of 2014 which authorized them, allows some flexibility in very stringent financial eligibility rules for public benefits programs such as Medicaid and Supplemental Security Income (SSI). The asset limit for SSI and many Medicaid programs has remained at $2,000 since 1984. This makes it very difficult for beneficiaries to accumulate any savings and for other individuals to assist them financially.

Fortunately, ABLE accounts offer a safe harbor for many beneficiaries. Unfortunately, in order to qualify the beneficiary must be able to prove they became disabled before age 26. At the end of 2022, Congress passed legislation expanding this to include people disabled before age 46, but this new rule does not take effect until 2026. I don’t know why there’s a delay or, for that matter, any age restriction at all, except for the history of the legislation. To some extent Congress created ABLE accounts to align with 529 accounts through which families may save funds tax free for college expenses. The reasoning was that many disabled children may not go to college, but should still get the benefit of similar accounts. While the beneficiary must have become disabled before age 26 (and beginning in 2026, before age 46), the account may be created and continue to operate at any age.

ABLE accounts are limited to $100,000 in total holdings and contributions of $17,000 a year, which corresponds with the annual gift-tax exclusion. (This limit which otherwise is only relevant to wealthy people doing tax planning should have any relevance to ABLE accounts is another weird feature of the law.) Neither the assets in ABLE accounts or contributions into them affect the beneficiary’s eligibility for public benefits. If assets remain in the account upon the death of the beneficiary, they must reimburse the state for its Medicaid expenditures on the beneficiary’s behalf, similar to self-settled special needs trusts.

Getting to your specific question, ABLE account funds may only be used for the benefit of the disabled beneficiary, and for specified purposes — qualified disability expenses — but the categories are very broad, including: education, food, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services and other expenses which help improve health, independence, and quality of life. Rent clearly falls within these categories.

You can read more about ABLE accounts in this pamphlet prepared by the Arc: http://www.thearc.org/wp-content/uploads/forchapters/National-Policy-Matters–ABLE-Act.pdf

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