Settling Cases for Clients on Medicaid and SSI: A New Option to Preserve Needed Benefits

As attorneys representing injury victims, you know that many of your clients rely on needs-based government benefits such as Medicaid or SSI.  A net settlement of anything over $2,000 likely means your client will need to spend their settlement down in the month it is received, or establish a special needs trust.  Until recently, those were the only two options for such clients.  However, the Achieving a Better Life Experience Act (“ABLE Act”) will soon be a third potential solution for many clients that receive modest settlements and need to protect their needs-based government benefits.

The ABLE Act was designed to enable people with disabilities and their families to save for and pay for disability-related expenses.

ABLE Act Summary:

  • The ABLE Act allows for the creation of savings accounts similar to 529 savings accounts. ABLE accounts may be used to accumulate savings, with certain restrictions, for use by a beneficiary with a disability.
  • The assets in ABLE savings accounts generally will not affect the beneficiary’s eligibility for SSI, Medicaid, and other public benefits. (SSI benefits will be suspended but not terminated if the ABLE account balance exceeds $100,000.)
  • The owner of an ABLE account must be the beneficiary of the account (the disabled individual). A designated beneficiary can have only one ABLE account at a time, and must have been disabled before his or her 26th birthday.
  • Contributions in a total amount up to the annual gift tax exclusion amount, currently $14,000, can be made to an ABLE account on an annual basis, and distributions are tax-free if used to pay for qualifying disability expenses.
  • Earnings accumulate tax-deferred in the ABLE account. Earnings are tax-free if withdrawn for qualified disability expenses.

Utah Update

The Utah State Legislature passed the ABLE Act in 2015 (effective May 12, 2015).  The Utah Department of Workforce Services (DWS)—not Utah Educational Savings Plan—will administer the Utah ABLE program. DWS is studying how to implement the Utah ABLE law.

Utah residents will not be able to open ABLE accounts until the study is complete and DWS implements the Utah plan.  The DWS recommendations are due to the Utah State Legislature on or before 11/15/2015.

We will provide you with updated information once the legislature takes further action on the recommendations from DWS.

Texas Update

The Texas Legislature passed the ABLE Act in 2015 (effective June 19, 2015).  The Prepaid Higher Education Tuition Board will administer the Texas ABLE program.  Currently, The Prepaid Higher Education Tuition Board is creating rules to implement, manage and govern the program.

We will provide you with updated information once the ABLE Act nears implementation (currently estimated to be Mid-2016).

Bottom Line for Plaintiffs

The ABLE Act gives injured individuals one more option when deciding how to allocate and utilize their settlement funds in a way that won’t jeopardize their continued eligibility for needs-based benefits such as Medicaid and SSI.

Please call us when you are settling a case for a client receiving any kind of government benefit.  We specialize in settlement planning and special needs law and can advise your client regarding the advantages and disadvantages of their settlement options in a way that will preserve their needed government benefits.

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