ABLE accounts underutilized by advisers: Report

ABLE accounts underutilized by advisers: Report
The savings vehicles are only available in one adviser-sold program, though 43 states provide direct-sold options
JAN 06, 2021

The relatively new 529 ABLE account can be one of the most useful savings vehicles for people with disabilities, but they have yet to pick up steam with financial advisers.

ABLE accounts, which stand for Achieving a Better Life Experience, have attracted more than $500 million in assets among more than 75,000 savers since 2016, according to data from a report late last month from AKF Consulting. And while 43 states and the District of Columbia have collaborated to provide those accounts, there is but one adviser-sold program in the country: the Virginia ABLEAmerica, which is distributed by American Funds. That program, which launched in mid-2018, represents less than 1,000 accounts, the AKF report notes.

“We think there is an opportunity for advisers on this,” AKF managing director Andrea Feirstein said. Currently, annual contribution limits are $15,000 per account, with one maximum account per beneficiary. But Congress could change that in the future in order to bring the accounts more in line with 529 college saving accounts, which allow multiple accounts per beneficiary and higher gift limits, Feirstein said.

Under the 2017 Tax Cuts and Jobs Act, ABLE accounts for working people who are not contributing to a retirement account can have an additional $12,760 in annual contributions, until 2026, when the law sunsets, the report noted.

“Advisers don’t see a big dollar play right now, but my view is that these are accounts that are in the best interest of your client. If you have a wealthier client who has someone with disabilities in his or her family, odds are you’re doing a special needs trust,” she said. ABLE does not have income limits for eligibility.

“There’s just no reason not to also do an ABLE account,” she said. “It’s just socking away $15,000 that you don’t ever have to think about. You get the power of the tax-deferred compounding.”

But there is a drawback to most of the ABLE programs, she noted. Only 11 states do not have Medicaid recapture provisions, meaning that most will attempt to recoup Medicaid funds advanced to an eligible beneficiary after they die.

The Virginia adviser-sold ABLE program is available to eligible savers in any state, though most states have their own direct-sold programs, and 16 of those have state tax incentives for contributions, according to AKF. By comparison, 35 states have their own tax breaks associated with their college savings plans.

Further, ABLE eligibility is limited to beneficiaries who experience a disability before age 26. Some legislators have proposed expanding that age to 46, which would increase the number of people eligible for ABLE accounts from an estimated 8 million to 14 million, Feirstein said.

Virginia’s College America plan, which is also distributed by American Funds’ parent Capital Group, represented $70.7 billion across 2.4 million accounts nationally, according to AKF.

That state’s ABLE plan shows a big difference in account sizes for people who work with advisers. That program has an average account size of about $11,600, compared with the national direct-sold account average of less than $7,100, the report stated.

Latest News

The 2025 InvestmentNews Awards Excellence Awardees revealed
The 2025 InvestmentNews Awards Excellence Awardees revealed

From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.

Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty
Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty

Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.

Edward Jones joins the crowd to sell more alternative investments
Edward Jones joins the crowd to sell more alternative investments

“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.

Record RIA M&A activity marks strong start to 2025
Record RIA M&A activity marks strong start to 2025

Sellers shift focus: It's not about succession anymore.

IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients
IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients

Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.