ABLE accounts and special needs trusts are settlement planning options for personal injury clients who are disabled.

What are ABLE Accounts?

ABLE Accounts were made possible by the Achieving a Better Life Experience Act of 2014. This relatively new option is another option for clients who receive Medicaid or Supplemental Security Income (SSI) and wish to maintain eligibility for those benefits after receiving a settlement. 

ABLE Accounts are an option for clients who were disabled before the age of 26. This age restriction is one of the main restrictions on ABLE Accounts — and it’s a restriction that reduces their use in some personal injury settlement.

Up to $17,000 per year (as of 2023) can be placed into an ABLE Accounts. An ABLE Account acts in a similar way as a special needs trust, but without some of the administrative burden and complexities of a special needs trust. 

ABLE Accounts are more flexible than special needs trusts. Funds within an ABLE Account can be used on food and shelter, which is a distinct advantage unique to ABLE Accounts. (Funds within a special needs trust generally cannot be used on food and shelter expenses).

What is a Special Needs Trust?

A special needs trust is an irrevocable trust specifically created for clients who are receiving Medicaid and SSI. A special needs trust ensures that a client will continue to receive those benefits after receiving a settlement. The funds placed in a special needs trust are not counted by Medicaid and SSI and will not affect their eligibility, and can be used for almost any expense except for items that are already being paid for by Medicaid and SSI.

Strategies with ABLE Accounts and Special Needs Trusts

If a client is eligible for an ABLE Account and is receiving a larger settlement, using both an ABLE Account and a special needs trust is often a great approach.

Once both the ABLE Account and special needs trust are established, we find that funding the ABLE Account from the special needs trust with $17,000 each year allows the client to have additional flexibility (i.e., the client can pay for food and shelter expenses) while still maintaining eligibility for Medicaid and SSI and having the protection and advantages of a special needs trust (e.g., the benefit of a trustee, dissipation protection, investment management).

Final Thoughts

If you have a client who is disabled and receives Medicaid or SSI, we’d be happy to explore whether an ABLE Account, a special needs trust, or a combination of both make the most sense for your client.