ABLE 529s: A Special Account for Special Needs

By Aaron E. Graham


You may be familiar with 529 accounts. 529 Plans are so named from the originating IRS Code section and serve as tax-advantaged college savings accounts. A new account known as the ABLE 529 is now available as a similar vehicle to save for expenses unique to those with special needs. Previously, the most common option to meet those needs were trusts known as special needs trusts. However, the introduction of ABLE 529s provide those looking to provide a means to cover expenses unique to those with special needs another option.

What are they?
On December 19, 2014, President Obama signed the ABLE (Achieving a Better Life Experience) Act. This law expanded the provisions in Section 529 to provide a framework for savings vehicles for beneficiaries with special needs.

Within that framework, individual states have created ABLE 529 Programs similarly to the way states have various 529 plans for college savings. The South Carolina ABLE Program was signed into law by Governor Haley on April 29, 2016 and the state treasurer’s office rolled out the program on November 16, 2017. The program was renamed the Palmetto ABLE Savings Program.

Who is eligible?
To open an account, the account owner (also the account beneficiary) must:

  • Have been diagnosed with a disability before age 26 and have a condition expected to last at least 12 consecutive months.
  • Be receiving SSI (Supplemental Security Income) benefits, SSDI (Social Security Disability Income) benefits, or have the ability to obtain a disability certification from a doctor.

How do they work?
ABLE 529s have some similarities to the traditional college savings 529s, but there are some distinct differences as well:


  • Contributions limited to annual gift tax exclusion amount ($15,000 in 2018) per contributor, per year.
  • Earnings grow tax-deferred and distributions are tax-free if made for qualified expenses.
  • Contributions made by South Carolina residents to Palmetto ABLE 529 Plan can be tax-deductible for South Carolina income tax purposes.


  • Qualified expenses include education, job training, health care, assistive technology, personal support services, and financial management.
  • If account value is under $100,000, account does not count as an available financial resource for the purposes of determining eligibility for SSI.
  • At beneficiary’s death, Medicaid may recoup any public benefits paid to beneficiary since the account was established. Assets may be used for funeral/burial costs.

ABLE 529 or Special Needs Trust?
After acquainting yourself with the basics of the new ABLE 529s, the question boils down to which is better: an ABLE 529 or a special needs trust? Special needs trusts do not limit the account value to $100,000 and can provide broader provisions on how the funds are used. Costs related to establishing, administering, and preparing and filing trust tax returns are also a substantial factor to consider. The trust will also need to be properly structured so trust income isn’t taxed at the highest rate of 39.6%, which comes into play with only $12,500 in income based on the 2017 tax brackets. However, trust assets will be taxable to the beneficiary when distributed.

If you are looking for a way to provide for someone with special needs and do not anticipate the need or ability to save more than $100,000, an ABLE 529 may be your best bet. The Palmetto ABLE Program has monthly maintenance fees of $3.50 and investment management fees ranging from 0.19% to 0.35% depending on the investment options selected. These costs are likely lower than the costs associated with establishing and maintaining a special needs trust.

For more information on the Palmetto ABLE Savings Program, visit


About Aaron E. Graham

Aaron E. Graham graduated from Coastal Carolina University in 2007 with a BS in Finance. He joined Abacus in July 2013, and earned the CFP® designation in August of 2015. Aaron earned the EA designation in March, 2018. As a member of the financial planning team, Aaron works closely with clients to understand their objectives in order to develop, implement and monitor a comprehensive financial plan to achieve those goals.

About Abacus

Abacus is a financial advisory and investment counsel firm known for its passion in creating success for clients and family businesses through skillful listening and smart financial decision making. Managing over a billion dollars on behalf of its 220 plus clients, Abacus consists of a team of multi-disciplinary experts who work collaboratively to serve its clients.