Preservation of Government Benefits After Settlement
Government benefits preservation: How does a settlement from a personal injury case affect SSI, Medicaid, and other benefits?
Many personal injury plaintiffs qualify for government benefits that help cover their medical expenses, ongoing care, and other costs related to their injury or illness. However, once the settlement from their personal injury lawsuit arrives, the added income could cause them to lose eligibility for those benefits. Expert settlement planning is needed to ensure a plaintiff can keep receiving benefits while still making the most out of settlement. Below are a few of the various tools that may be helpful.
Special needs trusts
A special needs trust helps keep an individual’s income under the limit for Medicaid and SSI eligibility. Money in this type of trust pays for non-countable resources (meaning things Medicaid and SSI do not cover), such as a home and furnishings, a car, higher education, and life insurance. A personal injury settlement can fund a special needs trust and is administered by an appointed trustee. Learn more about special needs trusts.
Pooled special needs trust
Pooled special needs trusts are set up and operated by nonprofit organizations, which pool together the resources of multiple trusts for investment purposes. As with a traditional special needs trust, money in a pooled special needs trust does not count toward an individual’s income, which can help maintain eligibility for government programs after settlement. The cost of establishing a pooled trust is typically much lower than that of a special needs trust, which makes it a good option for plaintiffs who are receiving a relatively small settlement.
Most states have spend-down provisions, which allow a plaintiff to spend most of their settlement within a set time frame – thus reducing his or her assets – to keep eligibility for benefits. With a spend-down, spending should be limited to non-countable resources (see above). These resources aren’t counted toward asset limits under SSI, so limiting spending to these resources should not threaten benefits eligibility. The resources purchased should be solely for the benefit of the SSI recipient.
A spend-down is typically appropriate for handling smaller settlements. It can also be a good choice for SSI recipients who need to purchase high-value items immediately – as long as those items are considered exempt.
Under the Achieving a Better Life Experience Act, or ABLE Act, qualified individuals and/or their families can create a tax advantaged account without impacting their eligibility for means-tested benefits. An ABLE account can pay for what’s known as qualified disability expenses, such as housing, transportation, basic living expenses, education, and more. Learn more about ABLE accounts.
Medicare set aside
For injured individuals who have Medicare, their other insurers are typically responsible for covering their related medical expenses first. If those insurers do not cover the full cost, Medicare may then become responsible for the balance. Medicare beneficiaries risk denial of coverage if the Centers for Medicare and Medicaid Services determine that Medicare’s interests have not been appropriately considered. A Medicare set aside is one way to avoid compromising this much-needed coverage. It is established from a portion of a settlement and used to pay for future injury- or illness-related medical expenses that would otherwise be payable by Medicare. Read more about Medicare set asides.