Will My Personal Injury Settlement Cause Me to Lose Medicaid or SSI?
Aug. 6, 2018
This is a guest post by Minneapolis Estate Planning Lawyer Michael Redden.
Sometimes, the News of A Large Settlement for An Injury Is Bitter Sweet.
This is especially true for clients who may be receiving government assistance. Most commonly, this is Medicaid and SSI benefits. These two programs have fairly strict income and asset limits on eligibility. In short, you normally are only eligible for some benefits because you have a financial need.
Don't worry though, there are a few ways that you can plan for this ahead of time. If you are receiving benefits, then you should work with your personal injury attorney to also consult with either an elder law attorney or an estate planning attorney. There are several tools at your disposal that will prevent the settlement from affecting your benefits.
Special or Supplemental Needs Trust
Today, we are going to talk about one such tool. This tool is commonly called a Special or Supplemental Needs Trust. This type of trust, is named because its beneficiary has special needs. These needs are essentially that the beneficiary receives government benefits. When the funds are placed inside of this trust, the government agency ignores them when calculating asset limits.
These benefits come with some strings though. The money inside of the trust cannot be used to pay for anything that the government benefits pay for. The most common example of this is doctor bills that are covered by Medicaid. The expenditure must not be something the state is already on the hook to pay.
Additionally, the money can't be given directly to you. So, you can't ask for some spending money and have the trustee cut you a check. Any money that enters into your hands directly affects eligibility. However, it can be used to pay your bills. The trustee just has to make the check out to the creditor. This can pay for anything from altering a vehicle so that you can drive it, home alterations, and even trips. The trustee just can't give you spending money on the trip. The trust must pay for this directly.
There is another feature of this trust that must be taken into consideration when considering this option. Some of these trusts must have the state as the beneficiary after you die. The state would receive money until every dollar that the government spent on your care was reimbursed. After that, anything left can go to your heirs.
Most times, there is no money left. So, if you take this option. Spend the money. Don't just let it sit there. Sure, it needs to last your entire lifetime, but don't leave money left in there for the government to get once you pass away. These trusts do cost money though.
If your settlement is a small one, say under $200,000. Then you might not want your own Special Needs Trust. There will be costs associated with the trustee, filing a tax return for the trust, and other administrative tasks. In this case, you should look into what is called a pooled trust.
This tye of trust is just like it sounds. An organization, usually sponsored by the state, sets up a trust that multiple special needs individuals may use. Your money is pooled together with all of the other beneficiaries and invested. You share in the gains inside of the account, but can only withdraw and spend money that represents the principle you placed in plus investment gain.
This allows for the costs of the trust to be spread out over many individuals. So, for smaller settlements, this is your best option in many cases. Your situation may have other options to keep your benefits as well. Discuss your situation with your attorney at length. Don't let your eligibility for benefits affect your decision on whether to accept a settlement without this advice.
About the Author
Michael Redden is estate planning attorney in Minneapolis who also helps clients protect their assets and access to government benefits. He is only licensed to practice law in the state of Minnesota.