What Happens to an ABLE Account When the Beneficiary Dies?
- Purple
- Aug 21
- 2 min read
ABLE accounts are powerful tools for helping people with disabilities save and spend without losing benefits—but many families ask the same important question:
What happens to the money in an ABLE account when the beneficiary passes away?
In this article, we’ll walk you through:
What happens to the account when someone dies
Medicaid payback rules
What families can use the funds for
Who inherits remaining money
How to plan ahead
What Purple is doing to make things easier
1. The ABLE Account Is Frozen
When the beneficiary of an ABLE account passes away, the account is typically frozen. That means no new contributions or withdrawals can be made unless they’re related to settling the person’s estate.
At that point, the account becomes part of the deceased person’s assets, and any remaining funds may be used to pay for specific end-of-life expenses or debts.
2. Medicaid Payback May Apply
One of the most important things to understand is Medicaid estate recovery. If the beneficiary received Medicaid while the ABLE account was open, the state may seek reimbursement from the account for services provided after the account was created.
This is sometimes called the Medicaid payback provision and it can reduce or eliminate the remaining balance in the account before anything is passed on to heirs.
However, not all states pursue Medicaid recovery, and some have chosen to waive it. It’s important to check your state’s policy.
3. Funds Can Be Used for Final Expenses
Before any money is claimed by the state or distributed to others, the family may use ABLE funds for:
Funeral and burial costs
Outstanding bills or medical expenses related to the beneficiary
Other qualifying expenses incurred before death
This helps ensure that ABLE funds are used for the beneficiary’s benefit—even after their passing.
4. What Happens to Remaining Funds?
If money is left after final expenses and any Medicaid payback, the remaining balance typically goes to the beneficiary’s estate. From there, it may be distributed to heirs or handled according to state probate laws.
If the ABLE account holder had a will, it can help guide how those funds are distributed. If there was no will, state laws determine who receives the funds.
5. Planning Ahead Is Important
If you manage an ABLE account for yourself or someone else, it’s worth thinking about:
Creating a simple estate plan or will
Knowing your state’s Medicaid recovery rules
Talking with a professional about using both an ABLE account and a special needs trust for long-term planning
A few small steps today can help avoid confusion or delays later on.
6. How Purple Can Help
Purple is building modern tools to help people with disabilities and their families navigate every stage of financial life—including what happens after an account holder passes away.
We’re working to:
Help users document beneficiary preferences
Make it easier to track ABLE contributions and spending
Provide clarity on account ownership and estate options
Work with state programs to reduce complexity in planning
We believe that everyone deserves dignity in both life and legacy.