Special Needs Trusts, ABLE Accounts, and Recent Law Changes

New Rules for Special Needs Trusts and ABLE Accounts, and Injury Settlements

When someone with a disability receives a personal injury settlement, it should bring stability and security, not new financial risk. Unfortunately, if those funds are handled incorrectly, they can unintentionally disqualify a person from critical government benefits such as Medicaid or Supplemental Security Income (SSI). That is where careful planning becomes essential.

Protecting Benefits After an Injury Settlement

Many government programs are “means-tested,” meaning eligibility depends on income and assets. A direct payout of settlement funds can push someone over strict financial limits, even if the settlement is meant to cover medical care, therapy, housing support, or long-term needs.

Without proper planning, a well-earned recovery could result in the loss of healthcare coverage or monthly benefits. That is why tools like Special Needs Trusts and ABLE accounts are so important.

Special Needs Trusts

A Special Needs Trust (SNT) is designed to hold settlement funds for a person with a disability without jeopardizing eligibility for public benefits. Instead of the money being owned directly by the individual, it is managed by a trustee who distributes funds for approved supplemental needs.

These trusts can pay for expenses that improve quality of life, such as:

• Specialized medical equipment
• Therapy not covered by insurance
• Education and training
• Transportation
• Housing-related costs
• Personal care assistance

There are different types of Special Needs Trusts, including first-party trusts funded with the injured person’s own settlement proceeds. These trusts must follow specific federal and state guidelines, and they often include reimbursement provisions for Medicaid upon the beneficiary’s passing.

When structured correctly, a Special Needs Trust allows a person to benefit from their settlement while continuing to receive essential public assistance.

What is an ABLE Account?

ABLE accounts were created under the Achieving a Better Life Experience Act to provide another way for individuals with disabilities to save money without losing benefits. These accounts function somewhat like tax-advantaged savings accounts.

Funds in an ABLE account can be used for “qualified disability expenses,” including housing, education, transportation, assistive technology, and health-related costs. In many cases, up to a certain amount can be held in the account without affecting SSI eligibility.

New Rules for Special Needs Trusts and ABLE Accounts

Recent changes to federal law have broadened eligibility for ABLE accounts. Previously, individuals were required to have a disability that began before age 26. New legislation has expanded the age threshold, allowing more individuals who become disabled later in life to qualify.

This expansion has made ABLE accounts a powerful tool for more injury victims, particularly adults who were injured in accidents and were not previously eligible due to age restrictions. It also allows working individuals with disabilities to contribute more in certain circumstances.

As a result, ABLE accounts are now an increasingly practical option either on their own or in combination with a Special Needs Trust.

When Special Needs Trust and ABLE Accounts Work Together in Injury Settlements

In some situations, a coordinated approach is best. A Special Needs Trust may hold the bulk of a settlement, while an ABLE account can be used for easier day-to-day access to funds. This strategy provides both protection and flexibility.

Careful structuring ensures that distributions are compliant with benefit rules while still meeting the person’s real-world needs.

Work With An Experienced Lawyer Who Understands the Financial Planning of Injury Settlements

Improper handling of settlement funds can undo the very protection a case was meant to provide. The difference between a properly structured plan and a direct payout can mean continued access to healthcare, housing support, and income assistance.

We regularly coordinate Special Needs Trusts and ABLE account solutions for clients whose settlements intersect with disability benefits. Our goal is simple: ensure that funds are protected, accessible, and fully compliant with the law, so that a recovery truly improves quality of life instead of creating unintended consequences.

If you or a loved one is receiving government benefits and pursuing an injury claim, early planning is essential. The right structure can preserve both financial security and long-term stability. Talk to the Lovely Law Firm today for a free case consultation.