Settlement planning should be considered for minors, adults who lack capacity, and injured persons with a disability who receive needs-based public benefits. Our firm is skilled in getting court approval of proposed settlements when required, such as when the injured person is a minor or is an adult lacking capacity. Our firm also creates Qualified Settlement Funds and can advise and assist with Medicare Set Aside arrangements.
Settlement planning is important for an injured person with a disability who receives needs-based public benefits. Settlement planning requires a strong, knowledgeable team of professionals who are willing to create a custom plan for each injured individual. Our firm works with financial planners, structured settlement brokers, accountants, public benefits specialists and private licensed fiduciaries frequently to create an efficient resolution with long lasting benefits for the injured person. The personal injury attorney should involve a settlement planner to make sure that the settlement does not cause the loss of vital public benefits for the injured person. For example, SSI and/or Medi-Cal recipients will lose their eligibility for SSI and/or Medi-Cal if they have more than $2,000 in assets or resources. Settlement planning will allow injured parties with a disability to receive a judgment or settlement and still be able to maintain eligibility for these needs-based public benefits. Settlement planning also helps injured persons with a disability plan for their post-settlement financial lives and achieve their post-loss goals.
What are needs-based public benefits? Needs-based public benefits include Supplemental Security Income (SSI), Medi-Cal, In-Home Support Services (IHSS), Section 8 housing assistance, and certain Veterans benefits (such as Veterans Disability Pension and Aid and Attendance benefits). Only individuals who are deemed “disabled” under the Social Security Act are entitled to SSI. Eligibility for even $1.00 of SSI results in automatic eligibility for Medi-Cal.
Helpful information for attorneys: Our firm is here to guide you through the complexities surrounding settlement planning. Our firm works with personal injury attorneys, injured persons with disabilities and their family members to create a plan that will achieve the injured person’s goals and needs. Our firm has created a checklist for personal injury attorneys to help assess if settlement planning should be considered. You can find it here: Checklist for PI Attorneys.
Tools for maintaining needs-based public benefits and planning for post-settlement financial lives. Various tools can be combined to maintain needs-based public benefits and can include:
Invest the settlement in “exempt” resources (the “spend down approach”). A primary residence, a vehicle, and certain other items do not count toward the asset/resource limitation for needs-based public benefits. For example, the injured person can use the settlement proceeds to purchase a home, improve the existing home, buy medical equipment or purchase a car, and still maintain needs-based public benefits.
Fund an ABLE account. An ABLE account can be funded with up to $15,000 per year. A disabled individual can only have one account and can only create an account if the disability occurred prior to the age of 26. Learn more about ABLE accounts here.
Transfer settlement funds to a pooled trust. The pooled trust, also called a (d)(4)(C) trust, is a trust established and managed by a nonprofit association. The pooled trust management invests the assets and makes distributions to the beneficiary. It can be used in conjunction with a structured settlement and it is the only viable trust option available to preserve needs-based public benefits for persons over the age of 65.
Establish a first party special needs trust. A first party special needs trust (SNT), also known as a litigation SNT, payback SNT or a (d)(4)(A) trust, is used when an individual receives assets, such as a settlement or an inheritance, which would otherwise disqualify that person from receiving needs-based public benefits. Read about types of special needs trusts here. 42 U.S.C. 1396p(d)(4)(A) authorizes the creation of the first party SNT wherein the settlement proceeds may be retained in the SNT for the sole benefit of the injured person with a disability who is under the age of 65 without the injured person losing eligibility for needs-based public benefits. The first party SNT also must provide that, on the death of the beneficiary, the trustee must repay Medicaid (Medi-Cal) for all benefits received by the beneficiary during his or her lifetime to the extent that funds remain in the trust at the beneficiary’s death. The first party SNT provides flexibility to the injured person by allowing the injured person to choose a trustee who will manage the assets for the injured person and by allowing the injured person and trustee to choose the investment options that work best for the injured person. The first party SNT integrates well with structured settlements, Medicare Set Aside arrangements, investment accounts and non-liquid assets. During the injured person’s lifetime, the first party SNT can pay for several types of items to enhance the injured person’s quality of life.
Gifting of the assets when the injured party is on needs-based public benefits, but is not “disabled”. In certain circumstances, an injured person may be on needs-based public benefits, such as Medi-Cal, but does not meet the definition of “disabled” under the Social Security Act. In these rare occasions, our firm can help design a plan in which the injured person participates in a “spend down approach” as described above, and/or a gifting of assets to a trusted family member who can then protect these assets for the injured person. This is a complex area and requires very careful planning that is dependent on the injured person’s specific situation.
To learn more about our settlement planning support services and special needs trusts, please contact us.