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Special Needs Trusts

Settlement planning is a process that can be summed up as optimizing all the elements of a personal injury settlement for the claimant’s benefit.

The extent to which any individual settlement can be optimized is always fact specific.  This means that the particular elements of each claimant’s settlement, or proposed settlement, need to be carefully considered along with the claimant’s needs and goals before any plan can be suggested or implemented.

The Benefits of Planning

Claimants and plaintiff attorneys both benefit from settlement planning.  For claimants, settlement planning holds the potential of two related benefits.  Planning can allow claimants to receive larger net settlements while also making settlement proceeds last longer and do more for them post-settlement.  Settlement planning can do this by leveraging all of the planning options that are available in light of a claimant’s circumstances and the elements of the case.

For plaintiff attorneys, conscious planning presents the opportunity of discharging their fiduciary duty to clients more fully.  In turn, this can minimize the risk of malpractice claims by increasing client confidence and client satisfaction.  Client confidence is increased when claimants know that their interests are being protected both pre-settlement and post-settlement.  Client satisfaction is increased when settlements are maximized, which can also lead to easier case management and increased referrals over time.

Planning Should Start Early

All planning is a proactive process by definition.  Settlement planning is no exception and so the earlier it begins the better.  Beginning early presents its own challenges, however, because the frequent unpredictability about case values and settlement dates can inhibit planning.

Even when planning early is not possible, however, claimants are generally better served when they are well informed.  Just having an early discussion often makes them more receptive and puts them in a better position to make decisions as their case progresses to settlement.

Whether you are ready to present options to a client or would simply like a quick consultation, we encourage you to give us a call and discuss your case.

Simply stated, Special Needs Trusts are an exception to the rules that normally apply to trusts when someone needs to become or stay eligible for public assistance programs like Medicaid and Supplemental Security Income (SSI).

This is a very important exception because Medicaid and SSI both have financial tests that impose very strict limits on the amount of income and assets someone may have.

The result of this financial testing is that Medicaid and SSI recipients are subjected to harsh and very difficult living conditions.  For example, in 2013, SSI has a total monthly income limit of only $710.00.    Regarding assets, both SSI and most Medicaid programs have a limit of $2,000.  Both programs exclude the value of one vehicle and a home from countable assets, but most of what someone would normally own counts against eligibility.

When a government agency counts income and assets to determine someone’s eligibility, agency always wants to know if that person has a trust.  The reason the agency wants to know about trusts is because the Medicaid and SSI rules are written so that trusts normally make someone ineligible for Medicaid and SSI.  By contrast, a Special Needs Trust that is properly written and established is a very specific legal exception to these rules and will not prevent someone from receiving Medicaid and SSI.

The benefit of having a Special Needs Trust is that it can be used to improve the quality of life for someone who receives SSI or Medicaid.  Instead of struggling to live on $710.00 a month, the beneficiary of a Special Needs Trust has a fund that can supplement the critical public assistance benefits they need instead of causing them to become ineligible.

Disbursements from a Special Needs Trust must stay within the SSI and Medicaid guidelines and follow two general rules.

  1. All disbursements must be made directly to vendors and service providers so that the disbursement does not count as income to the trust beneficiary.
  2. The disbursement must be for the purchase of services or goods for the sole benefit of the trust beneficiary.

Keeping these two general rules in mind, the items listed below are examples of just some of the ways in which a Special Needs Trust can be used:

  • Purchase of a home;
  • Home improvements, repairs, and condo fees;
  • Purchase and maintenance of a vehicle;
  • Alternate transportation such as cab fare or bus passes;
  • Installation of burglar alarm or monitoring and response system in home;
  • Telephone and cable expenses;
  • Education expenses, including a computer and other equipment;
  • Travel expenses;
  • Clothing and household goods;
  • Insurance premiums, both life and health;
  • Household goods and other items of personal property of reasonable value;
  • Cleaning supplies and paper products;
  • Dental care, physical therapy, massages, support services, and other medical costs not covered by public benefit programs;
  • Pre-need funeral expenses;
  • Durable medical equipment, such as wheelchairs;
  • Necessary services of a personal nature;
  • Home care services not covered by public benefit programs;
  • Entertainment expenses, for example, magazines, books, hobby supplies, tickets to movies, plays, museums, and sporting events.