ABLE Accounts

Common Pitfalls

You take money out of your ABLE account but don’t spend it on “qualified disability expenses”

You must spend any money you take out of your ABLE account on qualified disability expenses. If you spend it on expenses that don’t qualify, or if you just put the money in a different account, you may have to pay income tax on that amount, plus a 10% penalty, and this might affect Supplemental Security Income (SSI), Health First Colorado (Medicaid), or other benefits. Learn more about spending money in your ABLE account.

You (or others) deposit too much in your ABLE account in a single calendar year

There are two limits on how much can be put into your ABLE account each year, based on where the money comes from:

  • Up to $16,000 from any source, including your family and friends, your benefits, and other unearned income, and
  • Another $12,880 from your own earned income (if you have a job).

Colorado ABLE will automatically stop accepting deposits for the rest of the year once $16,000 has been deposited in the account (unless you submit paperwork to deposit more than that amount), but not every state does this automatically, so you may need to keep a record of how much has been put into your ABLE account.

Learn more about depositing money into your ABLE account.

You don't keep track of the deposits that others make in your ABLE account

It’s important to keep good records. Even if other people make deposits, you are the one who has to make sure that too much money isn’t put into your ABLE account.

Colorado ABLE will automatically stop accepting deposits for the rest of the year once $16,000 has been deposited in the account (unless you submit paperwork to deposit more than that amount), but not every state does this automatically. Check with your ABLE program if you have questions about this.

Important: Taking money out of your account doesn’t mean you can put more in. The deposit limits are on how much total money is put into the account each year. Taking some out doesn’t change that.

Learn more about depositing money into your ABLE account.

You get SSI and let the balance on your ABLE account go over $100,000

If the amount in your ABLE account goes over $100,000, your Supplemental Security Income (SSI) benefits stop. The suspension has no time limit, and your SSI benefits can start again if the balance drops below $100,000.

Even if SSI benefits stop because you have too much money in your ABLE account, you can still get Health First Colorado (Medicaid) coverage as long as you meet all other eligibility rules.

You want the money in your ABLE account to go to your family if you die

Because the ABLE account has to be in your name, any money left in the account after you die is used to pay back the Health First Colorado (Medicaid) program for any benefits you received since you first opened your ABLE account. Any remaining money has to go through probate (a long process) before it goes to your heirs.

If this could cause problems, look into setting up a Special Needs Trust, which has no limit on contributions. (Learn more about Special Needs Trusts.) Also, if you die, the money in the trust isn’t used to repay Health First Colorado (Medicaid) benefits, and it doesn’t go through probate before your heirs get it. You can have both an ABLE account and a Special Needs Trust.

Learn more