7 Key Questions about CalABLE Accounts Answered

Plenty of parents of kids with disabilities worry about how to provide for their kids far into the future — but traditional savings accounts can put individuals over the asset limits for many public benefits programs. For example, individuals receiving Supplemental Security Income (SSI) can’t save more than $2,000 without losing access to their monthly support. Enter ABLE accounts, which are designed for kids like ours to not only save but also invest without putting their public benefits at risk.

We sat down with Madeline Handy to learn all about CalABLE, the California-specific ABLE program. Check out the highlights of our conversation to hear more about CalABLE, how to get started, what to expect, and answers to commonly asked questions.

There are two key criteria for someone to be eligible for CalABLE:

1. Have a disability that started before age 26
2. Meet the eligibility requirements for SSI or SSDI

Handy notes that your child doesn’t actually have to be receiving SSI/SSDI benefits; they just need to be eligible, meaning their diagnosis is in the SSA list of compassionate allowances or “blue book.”

She continues, “We recommend that you receive a signed letter from a qualified physician, basically just stating that the onset of the disability was prior to age 26.” Even if you don’t apply for a CalABLE account at this time, Handy says, “We just recommend having it on file in case someone were ever to apply.” CalABLE accounts are tax-free, so this letter from a physician can also be presented to the IRS if you’re ever asked.

Handy gave these examples of qualified disability expenses:

• One parent used the funds to provide art therapy and horseback riding therapy lessons “to provide tools for my children, to help them better communicate and relate to the world.”
• Another parent spent CalABLE funds on a new family vehicle that accommodates their child’s wheelchair. “The money doesn't just have to be used for the person with disabilities. It has to be used for their benefit, but other people can use it,” says Handy. “[The child] is 10 years old. He is definitely not going to be the owner of the car; he's not going to be the one driving it. But because he benefits from that purchase, it is a qualified disability expense.” Similarly, a young adult living with their parents could use CalABLE funds to pay their portion of the rent or mortgage.

The key to a qualified expense is that it needs to benefit the person with a disability, so if purchasing a gift for someone else or gambling, for example, CalABLE funds should not be used. “Really just keep in mind that definition: if it improves health, independence, or quality of life, it is a qualified disability expense,” Handy says.

Although many states have ABLE programs, Handy recommends opening an account through your home state’s ABLE program first because it can provide unique advantages. She says, “For example, in California, CalABLE accounts are protected from Medi-Cal recovery.” If you move to another state in the future, you can roll the account over into a new state’s ABLE program, but you can only ever have one account at a time. You don’t have to live in California to have a CalABLE account, so even if you move, your account is still valid.

“The person with the disability is always the ABLE account owner and beneficiary of the funds,” Handy says, but it can be opened by an authorized legal representative. Who does that include, and what does that mean for you as a parent? Hear her explanation in this clip:

To open a CalABLE account, go to calable.ca.gov and complete the account enrollment process online. Handy says the process takes 20-30 minutes. You’ll be asked to provide your child’s name, Social Security or tax number, address, and other identifying information. You also need to provide your Social Security or tax number. If you need any help through the process, or if you have questions once your account is open, you can call the CalABLE customer service center at 833-225-2253.

It’s important to note that a CalABLE account comes with a maintenance fee of $30 per year. There are also percentage-based fees for using CalABLE investment services, which is optional.

Handy says there are three key ways to help your child get the most out of their account:

1. Save money
2. Grow money
3. Spend money

Contributions and gift contributions

To save money in your child’s account, Handy says, “The easiest way is to link a bank account. You can do electronic transfers, you can also set up recurring contributions as a set-it-and-forget-it sort of thing. There's also the ability to do direct deposit of Social Security benefits and even payroll at work. You can also mail checks to CalABLE.” Child support and SSI payments can be directly deposited into a CalABLE account.

You can also easily set up a way for other people to “gift” money directly to the account so it doesn’t count as your child’s income and interfere with benefits. Here’s how:

Investing with CalABLE

Handy tells us, “A lot of people will say, ‘I'm not on benefits. So is there even a point for me to open a CalABLE account?’” There is: investment! She says, “You can invest some money into professionally managed investment portfolios, and it has the opportunity to grow tax-free. So this is a really fantastic opportunity to build wealth through compound earnings….But the best part of a CalABLE account is that the money can be taken out at any time. So you don't have to wait until a certain retirement age like you would with a Roth IRA or other retirement accounts.”

As Handy explains, CalABLE has multiple different investment options to choose from based on your goals (for example, day-to-day expenses vs. a long-term goal like buying a car) and how comfortable you are with risk. You can even have multiple portfolios going at once. There are fees for these services, which Handy says hopefully are outweighed by the growth of the money in the account.

Accessing CalABLE funds

Once you have a bank account linked to your child’s CalABLE account, you can do an electronic transfer, but accounts also provide a prepaid, reloadable Visa card (with no fees!) that can be used to make purchases. Check out Handy’s explanation of why using the prepaid card (and eventually teaching your child how to use it) is a great idea:

Handy says, “We get this question all the time: Should I open an ABLE account or should I open a special needs trust? And really the answer is it's not either/or. It's a yes/and. We definitely recommend looking at both.”

The main differences are that a CalABLE can be opened quickly and has a low annual maintenance fee, but there are limits on how much you can contribute. A special needs trust has higher upfront costs because you’ll need an attorney, but there’s no limit to how much money you can save. You can learn more in our article ABLE Accounts and Creating a Special Needs Trust in California.

Thank you to CalABLE Outreach Specialist Madeline Handy for teaching us all about CalABLE accounts!

You can watch the full replay of our event here (with transcript available), where we go into more detail and also answer some questions that parents asked in the chat during our livestream.

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