Structured Settlements and Periodic Payment Judgments § 15.

05
Structured Settlements and Periodic Payment Judgments > CHAPTER 15: Government Benefits
and Structured Settlements

§ 15.05 ABLE Accounts

[1]-Introduction
Achieving a Better Life Experience (ABLE) accounts were established December 19, 2014
by Public Law 113-295, The Stephen Beck, Jr., Achieving a Better Life Experience Act
(ABLE Act), which established Section 529A of the Internal Revenue Code. An ABLE
account is a tax-advantaged savings account for eligible, disabled individuals, established
within a state ABLE program, to pay for qualified disability expenses. An ABLE program can
be established by a State (or State agency or instrumentality of a State). The account owner,
who is also the beneficiary, can open an ABLE account through the ABLE program in his/her
home state or any other state program that accepts out-of-state participants.
Contributions to ABLE accounts can be made by any person including the account
beneficiary, family members or friends, and/or special needs trusts or pooled trusts. These
contributions, however, must be made using post-tax dollars and will not be tax deductible
for purposes of federal taxes. Some states, however, allow for state income tax deductions
for contributions to ABLE accounts. Funds contributed to an ABLE account will not negatively
impact the owner/beneficiary's eligibility for "means-tested" public benefits, including but not
limited to Medicaid. Instead, the funds in ABLE accounts supplement these public benefits.
The ABLE National Resource Center and ABLE today offer excellent source information and
best practices related to ABLE savings accounts as well as federal and state-related ABLE
programs and activities, and both maintain up-to-date websites.1

As of January 2024, no clear legislative or regulatory authority exists either permitting or not
permitting structured settlement annuities to directly fund ABLE accounts. It is the authors'
understanding that the Social Security Administration (SSA) considers structured settlements
paid directly into an ABLE account to qualify as unearned income to the owner/beneficiary of
an ABLE account, thereby risking disqualification for Supplemental Security Income (SSI)
and other means-tested public benefits. To avoid public benefit disqualification, indirect
funding of ABLE accounts using structured settlements can still be achieved utilizing a
special needs trust (SNT) or pooled trust as an intermediary.

Understanding ABLE Accounts is essential for professionals involved with structured

settlements and settlement planning wrongful death cases, a settlement payee is a disabled
individual who is or may be eligible to use tax-favored ABLE accounts, and this is so

1 The ABLE National Resource Center website is available at http://www.ablenrc.org (last visited January 10, 2024). The ABLE
today website is available at https://www.abletoday.org/ (last visited January 10, 2024).
 Structured Settlements and Periodic Payment Judgments § 15.05

regardless of whether the underlying disability arose on account of the claim in question or
wholly independent of that claim as a preexisting condition; and (ii) once the practitioner
involved in a particular case recognizes that a given settlement payee is ABLE-eligible (or
may already have an ABLE Account), this opens the door for using - if not effectively
requires using -- settlement structuring tools that will no longer be available after a settlement
is finalized.

Section 15.05 provides a background review of ABLE issues addressing three related areas:
(1) the federal enabling legislation, including subsequent amendments, authorizing the use of
ABLE Accounts,2 and responses to this federal legislation by affected agencies, notably the
IRS and Social Security Administration;3 (2) activity in the 49 states that have passed
legislation to implement Qualified ABLE Programs;.4 and (3) a summary of how ABLE
Accounts are used in general practice.5 With that background, discussion then shifts to a
discussion of the relative merits of SNTs compared with ABLE Accounts (or a combination of
the two) as a means for protecting an ABLE-eligible individual's right to receive benefits and
assistance under means-tested federal programs.6 Finally, this section discusses the
structured settlement "direct funding" issue, including current practical alternatives and
proposed legislative and regulatory solutions.7

[2]-Federal Law

[a]-The Federal ABLE Act

. Known as the "Achieving a Better Life Experience Act of 2014," the ABLE Act8 was signed
into law by President Barack Obama on December 19, 2014 with the stated intent: "(1) To
encourage and assist individuals and families in saving private funds for the purpose of
supporting individuals with disabilities to maintain health, independence, and quality of life . .
. [and] (2) To provide secure funding for disability-related expenses on behalf of designated
beneficiaries that will supplement, but not supplant, . . . " federal benefit programs including
SSI, Medicaid, and other federal sources.9

2 See § 15.05[2] [a] and[b] infra.

3 See § 15.05[2] [c] infra.

4 See § 15.05[3] infra.

5 See § 15.05[4] infra.

6 See § 15.05[5] infra.

7 See § 15.05[6] infra.

8 The Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 ("ABLE Act") was enacted as part of The Tax Increase
Prevention Act of 2014, Pub. L. No. 113-295, div. B, Dec. 19, 2014, 128 Stat. 4056. The ABLE Act received strong bipartisan
support and was named in honor of Stephen E. Beck, Jr. who served as Vice-Chair of the National Down Syndrome Society
(NDSS). He was a central figure in enlisting support for the ABLE Act, and he died unexpectedly on December 8, 2014.
9 ABLE Act § 101.

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 Structured Settlements and Periodic Payment Judgments § 15.05

The ABLE Act authorized States or State agencies or instrumentalities to establish and
maintain qualified ABLE programs ("state ABLE programs") through which contributions may
be made to the account of an eligible disabled individual to meet his or her qualified disability
expenses. These funds in the ABLE accounts receive favorable treatment for purposes of
maintaining eligibility for certain means-tested federal benefit programs.

Assets in an ABLE account and distributions from the account for qualifying expenses are
disregarded when determining the beneficiary's eligibility for almost all federal means-tested
benefits.10

The ABLE Act allows annual deposits of an amount equal to the gift tax exclusion under IRC
§ 2504(b) ($18,000 in 2024) and accumulations up to $100,000 without affecting SSI.11
Similarly, any amount of savings in an ABLE account up to the state plan limit, which can
vary between $235,000 and $550,000 depending on the plan, will not affect the disabled
owner/beneficiary's eligibility for:
Social Security and Disability Insurance (SSDI),
Housing Assistance - Housing and Urban Development programs (HUD),
Supplemental Nutrition and Assistance Program (SNAP),
Free Application for Federal Student Aid (FAFSA),
Medicare Parts A, B, C, or D, Medicare Savings Programs, or
Any type of Medicaid benefit including Medicaid waiver services.
Before the ABLE Act was signed into law and the states, in turn, began to launch state ABLE
programs, persons receiving federal needs-based government benefits (including tort victims
who are settlement or judgment payees) had limited options for saving and accumulating
money while preserving eligibility to receive those government benefits. Basically, they could
either (a) spend down settlement or judgment proceeds within means-tested limits in the
month the proceeds were received, (b) use all but $2,000 of the proceeds to purchase
resources (SSA's name for assets) which are "exempt resources"12 such as a home, a car or
personal effects, or (c) divert all or a portion of those proceeds into a SNT.

The ABLE Act was improved by Congress in 2017 in two ways, both with strong bipartisan
approval. The ABLE amendments were included in H.R.1 - the Tax Cuts and Jobs Act,
signed by President Trump on December 22, 2017, with an effective date of January 1,
2018. The first 2017 amendment to the ABLE Act specifically allows the transfer of funds
from a 529 education plan to an ABLE account, as long as the maximum contribution from all
sources does not exceed the annual $18,000 limit.13 The second 2017 amendment allows an

10 See § 15.05[1][b][i] for a discussion of the general rule that an ABLE account will be disregarded in determining whether a
designated beneficiary qualifies under federal means-tested benefit programs and, importantly, exceptions to that general rule.
See also § 15.05[4] infra for a comparison of the scope of federal benefit programs for which eligibility can be preserved by use
of ABLE accounts as opposed to special needs trusts (SNTs).
11 ABLE Act § 103(a)(2).
12 The 48 "exempt resources" that SSA does not count, that is, those which can be owned by the disabled individual and not
affect eligibility for federal SSI benefits, and often, Medicaid, are listed in the Social Security Administration's Program
Operations Manual System (hereafter "SSA POMS") at POMS SI 01130.030 "Guide to Resource Exclusions."
13 HR-1 § 11025, titled "Rollovers to ABLE programs from 529 programs."

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 Structured Settlements and Periodic Payment Judgments § 15.05

ABLE account owner who resides in the continental U.S. and who works and does not
participate in an employer sponsored retirement plan - within that calendar year - to
contribute 100% of his or her wages earned, but in no event greater than the Federal Poverty
Level for a single person ($14,580 in 2023) to the ABLE account, over and above the
$15,000 annual limit.14 It is higher for residents of Alaska: $18,210 and Hawaii: $16,770 (in
2023).

Congress enacted the ABLE Adjustment Act in 2022 as part of its Omnibus Spending Bill.
This Act will increase the age of ABLE eligibility from "before age 26" to "before age 46" and
will become effective January 1, 2026. Testimony before Congress estimated this change
will expand the number of ABLE eligible individuals by an estimated six million people,
including one million veterans.15

The ABLE Act together with the state ABLE programs now offer settlement and judgment
payees an important new solution for saving and accumulating money while preserving
eligibility for needs-based government benefits and allowing direct access by the beneficiary
- with important caveats for structured settlements as discussed further below. Also
discussed below in the context of structured settlements and ABLE accounts, is the existing
federal rules on assignments of periodic payments provide reliable guidance as to how to
use a structured settlement with SNTs.16 A trust, without limitation including an SNT, may
fund an ABLE account.17 Some of the leading-edge issues and practices for doing so
include: whether application of Deficit Reduction Act (DRA) annuity rules apply to ABLE
accounts;18 and whether, under applicable pay-back rules, the state which administers an
ABLE account must be named as a contingent payee under a structured settlement if the
periodic payment obligation (or a portion of it) is made payable to the ABLE account in the
first instance. Federal agencies are providing more certainty in addressing these issues as
detailed below. Plaintiff attorneys, special needs attorneys, and settlement planners are
developing best practices as they gain experience in working with ABLE accounts on behalf
of their clients.

[b]-Federal Requirements for Qualified ABLE Programs

The federal ABLE Act and Code Section 529A establish the requirements that a state
ABLE program must satisfy in order to be a qualified ABLE program described in the
Code. The Treasury and IRS have released regulations that provide guidance on these
same requirements. These materials are addressed briefly below.

14 HR-1 § 11024, titled "Increased contributions to ABLE accounts."

15 Source: ABLE National Resource Center website (last visited Feb. 7, 2024).
16 SSA POMS §§ SI 01120.201.J.1.d and SI 01120.203.B.1.c.

17 SSA POMS § SI 01140.740.B.1.2: "Any person can contribute to an ABLE account. ("Person," as defined by the Internal
Revenue Code, includes an individual, trust, estate, partnership, association, company, or corporation.)." Use of ABLE accounts
in conjunction with SNTs is discussed at § 15.05[5] infra.

18 Annuity rules for Medicaid eligibility under the Deficit Reduction Act (DRA) are discussed at § 15.04[3] supra.

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 Structured Settlements and Periodic Payment Judgments § 15.05

[i]-Requirements Under the ABLE Act and Code § 529A

Under Code § 529A, a state is allowed to create a qualified ABLE program administered
by that state or an agency of that state's government.19 A program will not be treated as a
qualified ABLE program unless it complies with specified conditions, including as follows:
contributions to an ABLE account are subject to annual and cumulative limits;20
contributions are made in cash or cash equivalent;21 contributions made by someone
other than the account's designated beneficiary are treated as non-taxable gifts;22
distributions from the account are not included in the designated beneficiary's gross
income as long as those distributions are for "qualified disability expenses" (QDEs);23
and, in general, neither the ABLE account nor distributions from the account are treated
as income or resources of a designated beneficiary who is an eligible individual in
determining his or her eligibility for means-tested federal benefit programs24 and to
Medicaid.25

[ii]-IRS ABLE Regulations

The Treasury Department and the IRS released proposed regulations for qualified ABLE
programs on June 19, 2015, entitled "Guidance Under § 529A: Qualified ABLE
Programs," which were published in the Federal Register on June 22, 2015.26 On
November 19, 2020, the IRS published its final ABLE regulations, effective as of that
same date, entitled "Guidance Under § 529A: Qualified ABLE Programs".27 As a preface
to the regulations themselves, there is extensive supplementary background material.

19 See I.R.C. § 529A(b)(1).

20ABLE Act § 103(a)(2) establishes a cumulative limit of $100,000 for SSI eligibility, although per ABLE Act § 103(b)(2)
Medicaid is not affected by this SSI limit of $100,000.
21 See I.R.C. § 529A(b)(2).
22 See ABLE Act § 102(2)(A) and I.R.C. § 529A(c)(2).
23 See ABLE Act § 102(c)(1)(B)(i) and I.R.C. § 529A(c)(2).
24 See generally, ABLE Act § 103.

25 After acknowledging the general rule derived from Section 103 of the ABLE Act that a designated ABLE account will be
disregarded in determining its designated beneficiary's eligibility for and the amount of any assistance or benefit under means-
tested federal programs, the proposed regulations go on to identify the following exceptions:

[I]n the case of the Supplemental Security Income program under title XVI of the Social Security Act, distributions for certain
housing expenses are not disregarded, and the balance (including earnings) in an ABLE account is considered a resource
of the designated beneficiary to the extent that balance exceeds $100,000, § 103 also addresses the impact of an excess
balance in an ABLE account on the designated beneficiary's eligibility under the Supplemental Security Income program
and Medicaid.

26 80 Fed. Reg. 35602 (June 22, 2015); 26 C.F.R. §§ 1.529A-0 through 1.529A-7. "Until the issuance of final regulations,
taxpayers and qualified ABLE programs may rely on these proposed regulations." Federal Register, publication of proposed
Rules, "Guidance under Section 529A: Qualified 17," 80 Fed. Reg. 35602 (June 22, 2015); §§ 1.529A-0 through 1.529A-7. "Until
the issuance of final regulations, taxpayers and qualified ABLE programs may rely on these proposed regulations." Federal
Register, publication of proposed Rules, "Guidance under Section 529: Qualified ABLE Programs."

27 See 85 Fed. Reg. 74010 (Issue 224, Nov. 19, 2020).

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This includes, for example, a summary of federal legislative and regulatory tax history of
the ABLE Act, the most important of which includes the Tax Cuts and Job Act, signed into
law on December 22, 2017.28
Nothing in these final regulations or the included supplementary material specifically
addresses structured settlements. However, there is helpful guidance under the
background material entitled "Summary of Contents and Explanation of Provisions,"29 in
which the IRS (i) addresses comments that were received in response to its preliminary
ABLE regulations, and (ii) offers its rationale for specific provisions in the final regulations.

A threshold tax question that is important if a structured settlement is used to fund an

ABLE Account is "who" may make the contribution. The IRS addresses this question at
several points in the included background material, stating, for example: "The (ABLE)
statute does not differentiate between contributions based on their nature or source."30
.More specifically, the IRS states as follows:

"Contributions can be made by any person. The term person is defined in §

7701(a)(1) to include an individual, trust, estate, partnership, associations, company,
or corporation. Therefore, for purposes of § 529A(b)(1)(A), a person includes an
individual as well as each of the entities described in § 7701(a)(1)."31

And, for avoidance of any confusion as to whether (for federal tax purposes) an SNT may
be used to make such contributions, IRS final regulations stated expressly as follows:
"The Treasury Department and the IRS note that § 529A does not prevent a transfer from
a special needs trust to an ABLE account subject to the annual and aggregate
contribution limits of sections 529A(b)(2)(B) and 529A(b)(6)."32

Even though IRS final regulations under Code § 529A appear to tell us that a periodic
payment obligor will typically qualify as a "person" who can make contributions to an
ABLE Account, this does not answer the more important question whether the Social
Security Administration (SSA) or other affected agencies will, in turn, exclude such
contributions from the disabled person's countable income when means-testing his or her
eligibility for federal benefit and assistance programs. Absent legislative amendment to
Code § 529A (or, perhaps, regulatory change or judicial ruling), the answer to this
question turns on the SSA's own definitions as to what constitutes income for SSA
purposes. This is made clear in the following background statement accompanying the
IRS final regulations: "(B)ecause the Treasury Department and the IRS have no authority

28Id. at 74011. The Tax Cuts and Job Act included amendments to the ABLE Act, which are discussed supra at Ns. 8 and 8.1
and the accompanying text.

29 Id. at 74012-74033.

30 Id. at 74022.

31 Id. at 74024.

32 Id. at 74022.

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 Structured Settlements and Periodic Payment Judgments § 15.05

with regard to any program administered by the SSA, it is up to the SSA to decide
whether or not to adjust SSA's definitions."33

SSA's definitions that control whether contributions to an ABLE Account will be counted
as income for eligibility purposes under means-tested benefit programs are discussed
immediately below. And, concerning the question of "how" a structured settlement may
be fashioned so as to (directly) make or (indirectly) fund contributions to an ABLE
Account while maintaining a disabled person's eligibility for federal means-tested
programs, that topic is addressed more specifically in § 15.05[6] below.

[c]-Response by Affected Federal Agencies

There are several federal agencies whose traditional means-testing rules have been
directly affected by the ABLE Act. The most important federal agencies from the
perspective of individuals with disabilities are the Social Security Administration (for SSI
monthly cash benefits), CMS (for Medicaid health insurance), Housing and Urban
Development (HUD) for HUD-assisted programs and USDA (for supplemental nutritional
assistance program). All have issued implementing rules and directives.

[i]-Social Security Administration

The Social Security Administration provides Supplemental Security Income (SSI) monthly
disability payments to eligible individuals. SSI is the primary federal means-tested cash
benefit program for aged, blind and disabled individuals. In 2024, for example, the SSI
program paid monthly benefits up to $943 for an individual ($1,415 for an eligible couple
and $472 for an essential person) and one of the eligibility requirements for SSI in that
year was that an individual have an amount of countable income less than $1971 per
month. There are two types of income for SSI purposes - earned income and unearned
income. Payments made directly from a structured settlement to a tort victim/disabled
individual are considered unearned income and are countable for SSI qualification
purposes. In determining that individual's SSI benefit amount, after application of any
statutory income exclusions, countable income reduces the monthly SSI benefit dollar-
for-dollar.

Under the ABLE Act, contributions to an ABLE Account are generally excluded from
consideration in determining eligibility for or amount of benefits under means-tested
federal programs.34 However, complications arise because not all contributions to an
ABLE Account are treated the same. First-party contributions and third-party contributions
may be treated differently, both by the IRS for tax purposes and by the SSA and other
agencies for benefit and assistance program eligibility purposes. Third-party contributions
(i.e., a classic example being a grandparent's contribution as a gift to their disabled
grandchild's ABLE Account) do not present a problem for purposes of maintaining the
disabled individual's federal means-tested eligibility status. Likewise, contributions to an

33 Id. at 74028.
34 See ABLE Act, 128 Stat. 4063 (Pub. L. No. 113-295, div. B, title I, § 103.

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 Structured Settlements and Periodic Payment Judgments § 15.05

ABLE Account from a special needs trust or pooled trust35 (for example, where the ABLE
Account beneficiary is also a beneficiary of that SNT or pooled trust) are treated the same
as contributions from any other third party, and are excluded from consideration in
determining eligibility under means-tested federal programs.36

Concerning the use of a structured settlement to fund an eligible disabled individual's

ABLE Account other than by making payments to an SNT or pooled trust (i.e., and then
indirectly to the ABLE Account via the trust's "third-party" contributions to the ABLE
Account), complications arise because these periodic payments are subject to being
treated by the SSA as "first-party" contributions constituting countable income to the
disabled person. From a policy perspective, direct payment of structured settlements into
an ABLE account would seem not only consistent with but also supportive of the aims of
the ABLE Act.37 . So why are direct payments of structured settlements into ABLE
accounts impermissible (meaning they potentially disqualify the owner/beneficiary from
means tested public benefits) under the SSA's current definitional framework?
A helpful starting place for understanding this problem is the SSA's own employee
instruction manual, entitled Program Operations Manual System (POMS),38 which is a
primary source of information used by Social Security employees to process claims for
Social Security benefits. The POMS are not promulgated pursuant to the Administrative
Procedures Act, and are therefore nothing more than a statement (albeit an important
statement) of internal SSA guidance. For these reasons (i) the POMS do not have the
force and effect of law, (ii) there is no notice to the public prior to their revision or
issuance, and (iii) likewise, the public has no opportunity to comment on them prior to
issuance.

So, from the perspective of the SSA and POMS, if we look at the world of structured
settlements as it relates to disabled individuals who are ABLE eligible, here is what we
see in terms of the above-described situation of "first-party vs. third-party" ABLE Account
contributions, and when to count vs. exclude those contributions as income to the
disabled individual:
Contributions are payments of funds into an ABLE Account, must be in cash (which
may be in the form of cash, check, money order, credit card, electronic transfer, or

35Special needs trusts and pooled trusts, as described in § 1917(d)(4) of the Social Security Act, are discussed in § 15.04[7]
supra.

36 That is, while distributions from an SNT or pooled trust are considered income to the trust beneficiary in most circumstances,
distribution from an SNT or pooled trust to the ABLE Account of that trust beneficiary are not counted as income under § 103 of
the ABLE Act.

37See § 15.05[6] infra for discussion of public policy considerations for effectuating the stated goals of the ABLE Act, and the
opportunity for using structured settlements as an efficient means of funding ABLE Accounts for eligible disabled individuals.

38 The public online version of POMS is available at https://secure.ssa.gov/apps10/poms.nsf/Home?readform (last visited Feb.7,
2024). This public version of POMS is identical to the version used by Social Security employees, except that it does not include
internal data entry and sensitive content instructions. The portion of the POMS specifically relating to the ABLE Act (§ SI
01130.740) is entitled "Achieving a Better Life Experience (ABLE) Accounts" and is available at
https://secure.ssa.gov/apps10/poms.nsf/lnx/0501130740 (last visited Feb.7, 2024).

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 Structured Settlements and Periodic Payment Judgments § 15.05

similar method), and may be made by any "person" as defined by the Internal
Revenue Code. 39
Income received by the disabled individual (who is the designated beneficiary of the
ABLE Account) and contributed into his or her ABLE Account is considered as income
to the designated beneficiary; and direct-depositing of that income before it reaches
the disabled individual does not avoid this income counting. Examples of payments
that might be direct-deposited in this way into an ABLE Account include: wages;
benefit payments (such as from the VA or a pension); and mandatory support
payments (such as child support or alimony).40
The SSA considers periodic payments from a structured settlement as analogous to
these wage, benefit and support payments, even if paid directly into an ABLE
Account. That is, the periodic payments are considered by the SSA to be countable
income to the individual who is legally entitled to receive them and to whom the
payment is due. This reasoning by the SSA is reinforced by the fact that the person
entitled to receive the payment is also the owner of the ABLE Account.41

While it is perhaps surprising that payments from a structured settlement that are
excluded from gross income under 26 USC § 104(a) are not excluded from countable
income for SSI purposes, there are reasons this is so. The basic rationale for the SSI
program, and other federal means-tested programs of last resort, is that if an individual
has other means to support himself or herself, they should not be eligible for public
benefits.42 Viewed from a cost perspective alone, it is unlikely the SSA would act
independently to modify its position in this regard.

One might well then ask why the disbursement of funds from an SNT or pooled trust to an
ABLE Account - including funds that were directed to the SNT or pooled trust from a
structured settlement - are not counted as income under § 103 of the ABLE Act. The
rationale for this hinges on the distinction between "first-party" contributions vs. "third-
party" contributions as discussed above. That is, from the SSA's perspective, when
periodic payments from a structured settlement are direct-deposited into an ABLE
Account, they are first-party contributions; whereas, if the disabled individual's right to
receive those payments is irrevocably assigned43 to a trust, the trustee becomes the legal
owner of those rights to receive future payments, and a distribution of structured

39 See POMS SI 01130.740B.2. .

40 See POMS SI 01130.740C.1.a.
41 Private communication to one of the authors by Kenneth A. Brown, Esq., Deputy Office Director (retired), SSA.

42 Of course, a counter argument is that the longstanding rationale for the Code § 104(a) exclusion from gross income for
compensatory personal injury damages is that the purpose of such damages is to make a tort victim whole, not richer. The
history of and rationale for that statutory exclusion is discussed in § 2.01 supra.
43 In accordance with POMS SI 01120.210J1.d regarding "Assignment of Income", a legally assignable payment to a trust or
trustee is income for SSI purposes, unless the assignment is irrevocable.

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 Structured Settlements and Periodic Payment Judgments § 15.05

settlement proceeds from this trust to an ABLE Account is now a third-party

contribution.44
Attorney David Lillesand has proposed an alternative method to avoid or minimize the
impact of structured settlements on the eligibility of ABLE owner/beneficiaries to receive
means tested government benefits. Attorney Lillesand's proposed method, utilizing
annual periodic payments instead of monthly payments, does not avoid income counting
for SSI purposes. However, it does potentially reduce the impact as follows: assume a
2024 maximum annual ABLE contribution (all from a structured settlement) of $18,000
per year. If paid monthly, each payment would exceed the SSI Federal Benefit Rate
(maximum monthly countable income in 2024 is $943). Lillesand's proposed solution
recommends paying the $18,000 annual ABLE contribution in one periodic payment per
year which would result in only one month of ineligibility for SSI based on excess income.
Note, however, as attorney Lillesand himself has observed, there are overpayment
waiver provisions in SSA's regulations that provide SSA may waive recovery of an
overpayment when certain criteria are met.45
To address this SSA "direct payment" payment restriction on structured settlements, a
Task Force of the National Structured Settlement Trade Association (NSSTA) has
considered four alternative solutions:46

1. The SSA to amend the POMS to not count as income direct deposits of payments
from a structured settlement into an ABLE account owned by the same individual.

2. The SSA to amend the Federal Code of Regulations to not count as income direct
deposits of payments from an individual's structured settlement into an ABLE account
owned by the same individual.

3. The IRS to amend the Code of Federal Regulations to confirm that direct deposits
of payments from an individual's structured settlement into an ABLE account owned
by the same individual do not count as income for public benefit purposes.

4. Amend the Social Security Act to exclude from income either (1) payment from a
structured settlement agreement, exempted from income taxation under 26 USC §
104(a)(2), directly into an ABLE Act account owned by the individual entitled to
receive the structured settlement payment, or (2) any payment received from an
agreement, exempted from income taxation under 26 USC § 104(a)(2)."

[ii]- Centers for Medicare and Medicaid Services (CMS)

CMS published notice to all State Medicaid Directors on September 7, 2017 confirming
that funds in an ABLE account will not be taken into consideration when determining

44 For further discussion of direct vs.indirect funding of an ABLE Account from a structured settlement, see § 15.05[5] infra.

45 See: 20 CFR § 416.550, 20 CFR § 416.555, POMS SI 02260.030B.2, POMS SI 02260.030C.3.

46 These alternative solutions were considered by an NSSTA ABLE Task Force during 2022 and 2023. To the authors'
knowledge, NSSTA has not selected or acted upon any of these ABLE proposals as of January 2024.

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eligibility for Medicaid.47 This notice also provides information on how funds in an ABLE
account may interact with Medicaid eligibility.

[iii]-U.S. Department of Agriculture

The U.S. Department of Agriculture responsible for the Supplemental Nutrition Assistance
Program (SNAP), commonly known as "food stamps," also issued its instructions in a
memorandum to state agencies to exclude ABLE accounts as income or assets in
determining SNAP eligibility.48

[iv]-U.S. Department of Housing and Urban Development (HUD)

The Department of Housing and Urban Development (HUD) has published information on
how funds in an ABLE account may interact with HUD eligibility.49

This document also confirms that funds in an ABLE account will not be taken into
consideration when determining eligibility and continued occupancy for purposes of
income calculation and reviews under the United States Housing Act of 1937.

[d]-Additional Federal and State Benefits

Funds placed in an ABLE account gain protection in bankruptcy after 365 days.50 In addition,
many state tax codes have been amended to either qualify the deposits into an ABLE
account for a tax credit, or to exempt from state taxation the earnings on ABLE account
investments. For example, Ohio and Virginia give a $2,000 state tax credit for ABLE
contributions and Michigan gives a $5,000 state tax credit.51 Florida, which does not have an
individual state income tax, further enhanced the attractiveness of ABLE accounts by
providing that moneys paid into or out of the Florida ABLE Program Trust Fund by or on
behalf of a designated beneficiary are exempt from all claims of creditors.52

[3]-State ABLE Programs

47 . Available at https://www.medicaid.gov/federal-policy-guidance/downloads/smd17002.pdf (last visited Feb. 7, 2024). . .

48 See USDA letter to All Regional Directors, "Treatment of ABLE accounts in Determining SNAP Eligibility" (April 4, 2016),
available at https://www.fns.usda.gov/snap/treatment-able-accounts-determining-snap-eligibility (last visited Feb. 7, 2024).

49 See https://www.hud.gov/sites/dfiles/OCHCO/documents/2019-09pihn.pdf (last visitedFeb. 7, 2024). For further discussion of

two federal housing programs created by the Housing Act of 1937 that provide potential assistance for disabled persons, see §
15.07 infra.
50 ABLE Act § 104.

51 The ABLE National Resource Center (ANRC) is a collaborative whose supporters share the goal of accelerating the design
and availability of ABLE accounts for the benefit of individuals with disabilities and their families. ANRC's website maintains an
up-to-date list of all states' response to the federal ABLE Act, and allows comparison between programs on cost, financial
institutions managing the funds, state tax deductions for ABLE contributions and the amounts, and whether out-of-state
residents are permitted to invest in that state's ABLE program. http://www.ablenrc.org (last visitedFeb. 7, 2024).
52 F.S. § 1009.986(6).

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 Structured Settlements and Periodic Payment Judgments § 15.05

Forty-nine states have passed legislation to implement ABLE, and most State ABLE
Programs accept qualified individuals regardless of their state of residence.53 Some states
that initially passed implementing legislation withdrew or became inactive when it became
possible for their citizens to easily join other states in a coalition for administration and
investment purposes, rather than re-creating the wheel at their state taxpayers' cost. As one
result, eligible individuals have many choices and selection criteria when comparing
alternative state ABLE programs.54 The important point is that ABLE accounts are available
to all otherwise qualified persons regardless of state of residence, since the vast majority of
state-sponsored ABLE programs accept accounts from non-residents. The various states are
also issuing ABLE Act implementing regulations and changes in their state eligibility
manuals.55

[4]-ABLE Accounts in Practice

[a]-ABLE Statistics
The most recent National ABLE Account Data Statistics, available as of January 2023, by the
National Association of State Treasurers (NAST), current through the third Quarter of 2023,
is as follows:56
1. ABLE Accounts: 158,421
2. Assets Under Management (AUM): $1.55 billion
3. Average Accounts Balance: $9,788
Historical National ABLE Data
1. ABLE Accounts
a. 2016 - 4,064
b. 2017 - 17,314
c. 2018 - 34,707
d. 2019 - 57,999
e. 2020 - 81,869
f. 2021 - 112,021
g. 2022 - 137,192
2. AUM
a. 2016 - $13M

53 Personal communication to the authors dated January 11, 2022 by Doug Jackson, Deputy Director of Ohio's STABLE
Account, the first and largest state ABLE Program.

54 ABLE National Resource Center, http://www.ablenrc.org. Its website provides a very useful map to the various state programs
with descriptions of and links to implementing state legislation, the state's designated program sponsor and financial investment
firm, and the state's ABLE account webpage. See http://www.ablenrc.org/select-a-state-program/ (last visited Feb. 7, 2024).

55 See the ABLE today website, https://www.abletoday.org/national-able-data (last visited Feb. 7, 2023).

56 See the ABLE today website, https://www.abletoday.org/national-able-data (last visited Feb. 7, 2023).

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 Structured Settlements and Periodic Payment Judgments § 15.05

b. 2017 - $71M
c. 2018 - $171M
d. 2019 - $354M
e. 2020 - $638M
f. 2021 - $1.04B
g. 2022 - $1.25B

[b]-Eligibility for an ABLE Account

A person with a disability and their family are encouraged by the ABLE Act to save private
funds tax-free, much like a Roth IRA or a 529 college savings account. Money in the ABLE
account is generally disregarded when determining eligibility for means-tested federal
government benefit programs for persons with a disability.57 However, an individual does not
have to be currently receiving disability benefits to be eligible to open an ABLE account.
Individuals are eligible if they meet the disability criteria by either being entitled to SSI or
SSDI disability payments, having a condition on the SSA List of Compassionate Allowances
Conditions, or having a diagnosis from a physician that they have a severe and marked
disabling condition that can be expected to result in death or has lasted or can be expect to
last for a continuous period of twelve months or more.58

There are limitations. While current age is not considered when opening an ABLE account,
the onset of the disability must have occurred before the individual's twenty-sixth birthday.59
The ABLE Age Adjustment Act will increase the onset of disability age to age forty-six (46)
beginning January 1, 2026.60

Secondly, the amount that can be contributed from all sources to an individual's account is
limited to the maximum annual gift tax exclusion amount ($18,000 per year in 2024).. In
addition, an ABLE Account Owner who resides in the continental U.S. and who works and
does NOT participate in an employer sponsored retirement plan - within that calendar year -
may contribute up to an additional $14,580 from their earnings into their ABLE account. It is
higher for residents of Alaska: $18,210 and Hawaii: $16,770.

The total contributions over time that can be made to an ABLE account are subject to the
individual state and their limit for education-related 529 savings accounts. State ABLE limits
range from $235,000 to $550,000. For individuals with disabilities who are recipients of SSI,
the ABLE Act sets further limitations.61 The first $100,000 in ABLE accounts is exempted
from the SSI $2,000 individual resource limit. If, however, the ABLE account balance,
combined with other resources, exceeds $100,000, the beneficiary's SSI cash benefit will be

57 ABLE Act § 103(a).

58 ABLE Act § 102(e)(1).

59 Id.
60 Congress enacted the ABLE Adjustment Act in 2022 as part of its Omnibus Spending Bill.
61 ABLE Act § 102(b)(2)(B).

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 Structured Settlements and Periodic Payment Judgments § 15.05

suspended. When ABLE resources no longer exceed $100,000, SSI cash benefits are
reinstated. While the beneficiary's eligibility for the SSI cash benefit is suspended, the
beneficiary will still be able to receive or be eligible to receive medical assistance through
Medicaid.

An ABLE account is disregarded when determining federal benefit eligibility with the following
two exceptions for individuals receiving Supplemental Security Income (SSI):

1. For the purposes of determining eligibility for SSI, money in an ABLE account in
excess of $100,000 is considered an asset to the individual with a disability and may
cause SSI benefits to be reduced or suspended. An account balance up to and including
$100,000 is disregarded. There is no impact on Medicaid benefits if SSI benefits are
reduced or suspended due to the ABLE United account.
2. A Qualified Disability Expense (QDE) withdrawal that is intended to be used for a
housing expense but that is not spent in the same month will be considered an asset of
the individual with a disability and may cause SSI benefits to be reduced or suspended. If
the money withdrawn for a housing expense is spent in the same month, the money is
not counted as an asset.62

Fourth, at the death of the individual who owns the ABLE account, any funds remaining are
subject to a Medicaid estate recovery lien, which applies to persons age fifty-five or older at
the time of death. However, Medicaid recovery occurs only after payment of all outstanding
unpaid Qualified Disability Expenses for the individual, including his or her funeral and burial
expenses.63

[c]-Use of an ABLE Account

An ABLE account may be used as a complement or alternative to a fully-functioning SNT.
ABLE accounts are set up solely online through a state-designated portal requiring no lawyer
or other professional to draft documents or assist. Unlike SNTs, earnings in the ABLE
account are tax-free. And most important to many clients, access to the ABLE account funds
is direct and not through a trustee who generally charges a fee of 1 to 2% for managing the
funds, the earnings of which are taxed at the trust rates. ABLE accounts reduce excessive
involvement of lawyers, and trustees. Generally, withdrawals from an ABLE account will not
affect disability benefit programs as long as they are for living and disability expenses. The
IRS rules provide that money in an ABLE account may be withdrawn at any time and for any
reason via electronic transfer, debit card, or check. If the money is spent on one of the
following QDEs, which are intended to include "living expenses" and are not required to be
medically necessary, the earnings on the money withdrawn is tax-free:
Health
Education
Housing
Transportation

62 SSA POMS § SI 01130.740, Achieving a Better Life Experience (ABLE) Accounts.

63 ABLE Act § 102(f).

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 Structured Settlements and Periodic Payment Judgments § 15.05

Legal Fees
Financial Management
Employment Training and Support
Assistive Technology and Personal Support Services
Oversight and Monitoring
Funeral and Burial
Basic Living Expenses
Other expenses approved by the Secretary of the U.S. Treasury64

If money is withdrawn from an ABLE account to pay a non-QDE expense, the earnings
portion attributed to the withdrawn amount, and only the earnings, will be taxable income to
the individual with a disability, taxed at the individual's federal income tax rate. In addition,
the individual will be assessed an additional 10% based on the taxable amount. For
example, if $500 is withdrawn and not spent on a QDE from the list above, the penalty is
based on a determination of the earnings attributed to that $500 but not the $500 itself, and
that amount, plus 10%, must be declared on the individual's federal tax return as taxable
income. If the account had a 15% return on its investments, then 15% of $500 or $75 would
have to be included as income plus a 10% penalty of $7.50, yielding a total of $82.50 which
must be included as taxable income on the disabled person's tax return.

However, as regards SSI benefits, if the beneficiary spends the non-QDE distribution within
the month of receipt, there is no effect on eligibility and the funds withdrawn will not be
considered an asset to the individual with a disability. However, the government will apply
normal SSI resource counting rules and exclusions to assets or other items purchased with
funds from an ABLE account. The treatment of the withdrawal may be an asset and the
earnings may be regarded as income that may result in a reduction or suspension of federal
disability benefits.65

[d]-Management of ABLE Accounts

The individual with a disability is the owner of the ABLE account66 and may manage the
account independently. If the individual cannot, or would prefer to have assistance, an
individual legally authorized to act on his or her behalf (such as a parent, legal guardian, or
person acting under the power of attorney) may open and manage an account.67 The
individual with a disability owns all money in the ABLE account - including money contributed
by a third-party. While the individual may have someone assist them, the individual(s)
assisting do not have any ownership interest in the account. The account is to be managed
exclusively for the benefit of the individual with a disability.

64 ABLE Act § 102(e)(5).

65 SSA POMS SI 01130.740.D.2.
66 I.R.C. § 529A(e)(3) and ABLE Act § 102(e)(3).
67 SSA POMS § SI 01130.740.B.4.

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Although states sponsor ABLE accounts, the financial management of the funds is left to
private financial institutions, such as Fidelity, Vanguard, BlackRock, Schwab, and others.
When individuals open an ABLE account, they choose an investment strategy from those
offered by the state ABLE program. The strategies can vary from very conservative (FDIC-
insured money market accounts) to more risky growth funds in U.S. and international stock
funds, or a blend of strategies. ABLE account owners are limited, by the ABLE Act, to
change the way their money is invested in the account up to two times per year.

[5]-Comparison of Special Needs Trusts (SNTs) and ABLE Accounts

SNTs68 and ABLE accounts have important similarities and even more important
differences. Given the newness of ABLE accounts, judges, plaintiff attorneys, settlement
planners and annuity brokers will typically have far more experience in working with SNTs
than with ABLE accounts and, for that reason, it is only in grasping the differences
between these two statutorily created safe harbors that settlement decision makers (and
judges) will be able to understand which option (or combination thereof) is in the best
interest of any particular settlement payee.

[a]-Similarities Between SNTs and ABLE Accounts

As indicated above, SNTs and ABLE accounts are both statutorily-created safe harbors,
and both should at least be considered for use in settlement of almost all serious and
disabling personal injury lawsuits where there is a need to preserve eligibility for means-
tested federal benefit programs. Additional similarities between SNTs and ABLE accounts
include:
Preserving eligibility for SSI and Medicaid. SNTs and ABLE accounts both enhance a
disabled person's economic independence and ability to address disability-related
needs, by maintaining his or her eligibility for SSI and Medicaid while retaining access
to cash over and above the $2,000 resource limit, and.
Medicaid payback rules do apply. Medicaid payback rules69 apply to first party
(beneficiary-funded) SNTs as well as to ABLE accounts, although the terms of
repayment are more favorable with ABLE accounts.70

[b]-Differences Between SNTs and ABLE Accounts

Concerning differences between SNTs and ABLE accounts, for the most part, these
differences cut in favor of ABLE accounts for those individuals who are eligible to use
either. The principal advantage of SNTs over ABLE accounts is that the former is not
subject to annual contribution and other limits whereas the latter is subject to both;71

68 Special Needs Trusts are discussed supra at § 15.04[7].

69 Medicaid payback rules as they apply to Medicaid liens are discussed supra at § 15.04[6], and as they apply to SNTs upon
the death of the Medicaid recipient are discussed supra at § 15.04[7][b][v].

70See Ns. 82 - 88 infra and accompanying text for a comparison of Medicaid payback rules for ABLE accounts as opposed to
SNTs.

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however, these limitations can be overcome in appropriate cases by coupling the use of
an ABLE account with a SNT.72 Another major limitation on the use of ABLE accounts is
the eligibility requirement that designated beneficiaries must have been disabled before
their twenty-sixth birthday, meaning that an ABLE account can still be established for
someone older than twenty-six but only if the onset of the disability was before his or her
twenty-sixth birthday.73
Differences between SNTs and ABLE accounts, which generally favor the use of ABLE
accounts over SNTs (for those eligible to use either), include:
Ease of set up. A special needs planning attorney is needed to draft a first party self-
settled individual SNT 74 or the joinder agreement to a pooled SNT, 75 and to prepare
the corresponding notice to be given to the Social Security Administration ("SSA") or
to Medicaid; whereas a settlement payee and/or the payee's family member can set
up an ABLE account online on their own without involving an attorney to draft needed
documents.
Reporting. The disabled individual with an ABLE account can rely on the state ABLE
agency's monthly reporting to SSA of ABLE account deposits and disbursements, 76
whereas individuals must keep records and are responsible for periodic reporting of
the ins and outs of SNT funds.
Age of beneficiary. By federal statute, self-settled (first party) SNTs cannot be
established without a significant transfer penalty for persons who are age sixty-five or
above, whereas ABLE accounts can be established for persons of any age, as long as
the onset of the disability began prior to age twenty-six. This addresses the ability of
persons with developmental disabilities, for example, to establish ABLE accounts in
their late sixties or beyond.
Cost of set up and ongoing administrative expense. Set up fees charged by special
needs planning attorneys for SNTs can range from $500 to $5,000 or more, plus
annual trustee fees up to 3% or more based on the amount held in trust; whereas the
setup fee and annual management fee for an ABLE account, which may vary among
state ABLE programs, will be very modest in comparison, and some states no longer
charge setup nor annual account management fees. The only cost of the ABLE

71As of 2017, the annual contribution limit to an ABLE account is $14,000 and the accumulation limit for SSI purposes is
$100,000 (plus the $2,000 resource limit).

72 One method for special needs planners and settlement planners to use an ABLE account in conjunction with a SNT is simply
to transfer funds from the SNT to an ABLE account under which the SNT's beneficiary is the designated beneficiary of the ABLE
account. Before doing so, care should be taken that the SNT is drafted to authorize and place appropriate limits on the SNT
trustee's power to do so. Among other advantages of using an ABLE account to supplement a SNT in this way, the
administrative overhead of the SNT may be reduced by decreasing the amount of assets under management in the SNT (i.e.,
where the trustee's administrative fee is based on a percentage of assets under management) and by transferring funds out of
the SNT in the maximum ABLE amount.
73 See I.R.C. § 529A(e)(1).

74 Self-settled or [(d)(4)(A)] SNTs are discussed supra at § 15.04[7][b][i].

75 Pooled or [(d)(4)(C)] SNTs are discussed supra at § 15.04[7][b][vi].

76 I.R.C. § 529A(d)(4).

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 Structured Settlements and Periodic Payment Judgments § 15.05

account is the basis points investment fee by the managing financial institutions which
can be extremely modest, less than one-half of one percent.
Method used for certifying "disability". The SSA uses an intentionally restrictive
evaluation process for certifying whether an adult has a "disability" that entitles him or
her to receive disability and SSI benefits; whereas "disability certification" rules under
Code § 529A regulations use the more lenient and easier-to-prove child disability
standard applied by the SSA (i.e., "marked and severe functional limitations in
domains") even for designated beneficiaries who are adults. 77
Establishing the validity of "safe harbor" status. All SNTs are reviewed by SSA
Regional SNT Review Teams having authority and discretion to deny SNT safe harbor
status; whereas no individualized federal benefit agency approval is needed to
establish the validity of an ABLE account as long as the ABLE beneficiary places
funds in a previously-approved state-sanctioned account.
Number of SNT or ABLE accounts. Individuals may have multiple first and third party
SNTs, which can be useful in special needs planning for certain individuals; whereas
an individual may have only one ABLE account. 78 However, there is no discernable
need for having more than one ABLE account since first and third party funds can be
contributed to the account without any legal drafting or government agency approval.
Access to funds in the account. SNT assets are administered by a trustee who acts as
the gatekeeper between the trust funds and trust beneficiary, and the trustee pays
directly to the providers of goods and services for the beneficiary; whereas the
disabled ABLE account owner or his designated representative may directly use
ABLE account funds to pay for the beneficiary's goods and services as they are
needed.
Applicability of the "sole benefit rule". SNTs must be established and used for the
benefit of the disabled individual, which the SSA has interpreted to mean "for the sole
benefit" of that individual; whereas proposed regulations under Code § 529A state
"that the term 'qualified disability expenses' should be broadly construed to permit the
inclusion of basic living expenses and should not be limited to expenses for items for
which there is a medical necessity or which provide no benefit to others in addition to
the benefit to the eligible individual." 79
Scope of federal benefit programs for which eligibility is preserved. SNTs preserve
eligibility for two federal benefit programs, SSI and Medicaid; whereas ABLE accounts
preserve eligibility under eleven means-tested federal programs. 80
Requirement of prior government approval before making distributions. Some states
impose a requirement of advance welfare department approval for distributions of
significant sums, such as $5,000 or more, from SNTs; whereas there is no
requirement to obtain prior government approval before making distributions from
ABLE accounts for the designated beneficiary's disability-related needs.

77 See SSA POMS §§ SI 01120.203.B.1.e and § SI 01120.201.F.2.

78 See Treas. Proposed Regs. §§ 1.529A-(2)(e)(1)(A) and 1.529A-(2)(e)(2).

79 See § 15.05[2][b][ii] supra, "IRS ABLE Regulations.

80 See ABLE Act § 103.

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 Structured Settlements and Periodic Payment Judgments § 15.05

Payment of funeral and burial expenses. SNTs are required to stop all distributions on
behalf of the beneficiary upon his or her death, even for funeral and burial, except
limited trust-windup administrative and legal fees and taxes in wrapping up the trust; 81
whereas the funeral and burial expenses of an ABLE account owner are treated as
QDEs and may be paid after death but before repayment of Medicaid payback
amounts. 82
Other permitted distributions (apart from funeral and burial expenses) after the
beneficiary's death and before payback of the Medicaid lien. SNTs are required to
stop all distributions on behalf of the beneficiary upon his or her death, except as
authorized by POMS; 83 whereas ABLE accounts may pay all outstanding qualified
disability expenses before payment of the Medicaid lien. 84
Amount of the Medicaid lien that is subject to recovery by the applicable state
Medicaid agency. SNTs must repay all states for all medical assistance from the
beneficiary's birth to death, meaning that the payback obligation includes a look-back
prior to creation of the SNT; 85 whereas ABLE accounts are required to repay medical
assistance "after establishment of the ABLE account" 86 meaning that the payback
period does not include a look-back period prior to creation of the ABLE account.
Complete state waiver of the Medicaid lien. Some states have taken action to
completely waive Medicaid payback from ABLE accounts, and other states are
considering such a waiver, but none are considering the complete waiver of Medicaid
payback from any first party self-settled SNT.
Age at death as it affects Medicaid payback. Death at any age, even infancy, requires
Medicaid payback from funds remaining in an SNT whereas funds in an ABLE
account are subject to the Medicaid lien only if the person died at age fifty-five or later.
Other people's money and Medicaid liens. First party SNTs 87 funded with the
disabled beneficiary's money (personal injury proceeds, received gifts or unplanned
inheritances) are subject to Medicaid liens, as are remaining funds in an ABLE
account after death, whereas thirdparty funds (parents' or grandparents' or others'
funds) 88 in third party SNTs are free from Medicaid liens, but thirdparty funds in an
ABLE account are subject to a lien. Therefore, significant thirdparty money should be

81 See SSA POMS § SI 01120.203.B.3.

82 See ABLE Act § 102(f); and POMS SI 01130.740.B.5.
83 See SSA POMS § SI 01120.203.B.1.e and § SI 01120.201.F.2.
84 See ABLE Act § 102(f) and POMS SI 01130.740.A.
85 SSA POMS § SI 1120.203.B.1.h.
86 See ABLE Act § 102(f).

87Trusts established with funds already legally belonging to the disabled beneficiary, and exempted pursuant to 42 USC §
1396p(d)(4)(A) for individually drafted SNTs or 42 USC § 1396p(d)(4)(C) for joining the Master Pooled Trust of a sponsoring
non-profit entity.
88 Third party funds, also known as other people's money, is exempt from Medicaid liens upon the death of the disabled
beneficiary as long as the third party SNT is drafted according to four specific rules: the third party trust has a spendthrift clause,
the beneficiary has no ability to control or direct the use of the funds during lifetime, and the disabled beneficiary cannot
terminate or revoke the third party SNT. POMS SI 01120.200.D.1.b.2.

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held in a non-lien third party SNT which will then use the ABLE account as a revolving
bank account to supplement the direct cash needs of the disabled beneficiary on a
monthly basis, thus reducing the exposure to Medicaid payback of the funds
remaining in the ABLE account upon the disabled beneficiary's death.

[6]-Using Structured Settlements to Fund ABLE Accounts

[a]-Indirect Funding via an SNT or Pooled Trust

The ABLE Act together with the State ABLE Programs provide settlement payees who are
qualified disabled individuals with an important tool to save and accumulate money while
preserving eligibility for needs-based government benefits. Existing federal rules coupled
with informal SSA guidance make clear that a structured settlement may be used to fund an
ABLE Account indirectly via an SNT or pooled trust;89 however, because the related decision
making on behalf of disabled individuals is sufficiently complex, and arcane, it is almost
always advisable to involve an experienced special needs attorney or settlement planner
before settlement decisions and documentation are finalized. Plaintiff attorneys, special
needs attorneys, and settlement planners are developing best practices as they gain
experience in working with ABLE accounts on behalf of their clients.

[b]-Thoughts on Direct Funding of ABLE Accounts from a Structured Settlement

Representatives of multiple State ABLE Programs have informed the authors that their
programs have, in fact, from time to time accepted direct structured settlement payments to
fund an ABLE Account, although the authors are not aware, as of January 2024, of any
litigated cases resulting from such arrangements that provide guidance on whether this may
be done while preserving eligibility for means-tested government benefit programs.
Section15.05[1][c][i] above spells out the SSA's interpretive position as to why, under its
understanding of applicable statute and regulations, this may not be done. Meanwhile,
special needs attorneys disagree as to whether structured settlement payments may be used
for direct funding of an ABLE Account while preserving eligibility means-tested government
benefits, whether or not certain arcane workarounds and waivers90 are employed.

89 See in particular §§ 15.05[2][b and 15.05[2][c] supra regarding these federal rules and informal guidance.

90 For example, one possible waiver-based workaround has been suggested as follows: The maximum annual contribution to an
ABLE Account from all sources is $15,000 and, if that annual maximum were to be paid into an ABLE Account (i.e., directly from
a structured settlement) in equal monthly amounts, that monthly payment would be $1,250. Since the SSI program counts
income and pays benefits on a monthly basis, this $1,250 monthly payment would result in ongoing ineligibility for SSI because it
exceeds the SSI maximum monthly countable income which, for example, was $794 in 2021. If, instead, the entire $15,000
maximum annual ABLE contribution were made as a single structured settlement payment in one year (i) this would presumably
result in one month of ineligibility for SSI based on excess income, and (ii) ineligibility means that any benefit payments received
that month become an overpayment subject to recovery. While there are overpayment waiver provisions in SSA's regulations
that provide SSA may waive recovery of overpayment when certain criteria are met (a) these rules and the SSA's informal
guidance under them are themselves complex, and (b) it isn't at all clear if this would or should be deemed an improper gaming
of published SSA rules and guidance, particularly if the structured settlement provided for such payments on a repeating year-to-
year basis.

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 Structured Settlements and Periodic Payment Judgments § 15.05

There are compelling public policy reasons for permitting the direct payment of
compensatory damages under a structured settlement to fund ABLE accounts for qualified
disabled individuals. They include:
The public policy purpose of the ABLE Act includes language ("to provide secure funding
for disability expenses"), and structured settlements funded by life insurance annuities
and/or debt obligations of the U.S. government would certainly assist in meeting this
objective.
In its ABLE POMS, the SSA already provides that a legally assignable payment to a trust
or trustee (which includes an SNT or pooled trust, and trustee of same) is not countable
as income to the ABLE beneficiary for SSI purposes, provided that the assignment is
irrevocable. Likewise, and provided that periodic payments under a structured settlement
are irrevocably assigned to an SNT or pooled trust, beneficiaries of such trusts may have
"third-party" contributions to their ABLE Accounts that are not countable as income for
SSI purposes.
Existing IRS and SSA rules for trust assignments and "third-party" ABLE Account
contributions work a real advantage for ABLE-eligible disabled individuals who are
fortunate enough to receive a structured settlement that pays them more than $18,000
per year. For SSI and similar purposes, these disabled individuals need, and often can
afford, the cost of establishing an SNT or a pooled trust that funds an ABLE Account.
Existing rules and the SSA's current position, however, do not help the presumably larger
number of ABLE-eligible disabled individuals who, for whatever reason, are not fortunate
enough to receive a large enough structured settlement to afford or justify paying for SNT
or pooled trust services. As a result, injury victims receiving smaller structured settlement
have no access to efficient "direct funding" of ABLE account.
This inequality of access to ABLE accounts among structured settlement recipients (that
disadvantages those recipients who most need ABLE accounts) appears to contradict the
fundamental and bipartisan-supported policy reasons responsible for the ABLE Act in the
first place.
Until this "direct funding" issue is resolved definitively by statute or regulation of the SSA
POMS, professionals are advised to continue use of indirect funding strategies utilizing
special needs trusts.

[c]-Thoughts on Solving the Problem of Using Structured Settlements for Direct

Funding of ABLE Accounts

A NSSTA Task Force previously has identified four alternative solutions to the SSA's "direct
payment" restriction on structured settlement ABLE contributions.91 Given that Congress has
already demonstrated not only wholehearted bipartisan support for enactment of ABLE, but
also a willingness to amend that legislation when and as needed, it seems obvious that the
best course of action is not only to hope for, but actively to seek, a statutory change to §
529A of the Internal Revenue Code or (perhaps better) to the ABLE Act itself, so as to

91 See § 15.05[2][c][i] supra for a discussion of the SSA's "direct funding" restriction on structured settlement ABLE
contributions.

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 Structured Settlements and Periodic Payment Judgments § 15.05

disregard the direct payment of funds from a structured settlement to an ABLE Account from
the countable income of disabled individuals for federal means-tested programs. NSSTA,
along with other settlement planning, special needs, and disability associations should
cooperate to prioritize this legislative objective.

Structured Settlements and Periodic Payment Judgments

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Further duplication without permission is prohibited.

End of Document

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