What happens if the beneficiary is no longer eligible for an account?
If a beneficiary no longer meets eligibility requirements, they no longer qualify to get an ABLE account and they (or their account manager) should sign into the account’s settings and update their eligibility. Their account will remain open and they can continue to use the account until the end of the year.
After the end of the year, they stop being eligible, no new contributions (including automatic transfers) will be allowed, and account withdrawals will be treated as non-qualified withdrawals. The savings portion of non-qualified withdrawals is subject to income taxation and a 10% federal penalty, and non-qualified withdrawals may affect eligibility for SSI (Supplemental Security Income) and other federal benefits. The account will close if all the money is withdrawn.
If the beneficiary begins to experience an eligible disability again, they can sign in to the account’s settings and update their eligibility. If the account has been closed, they can sign up for a new one here.