This article will explore and identify challenges faced when working with elder abuse cases. One ongoing issue for all serious injury case is protecting government benefit eligibility. Many injured parties become uninsurable and counsel must protect the potential or future need for MediCal. This issue is more common and challenging with Elder abuse case settlements due to the increased number of potential clients who utilize or qualify for MediCal and\or Supplemental Security Income (SSI). Any client who is or has become totally and permanently disabled based on the Social Security Administration definition[i] may be eligible for MediCal or SSI (Supplemental Security Income). Any settlement funds from the case will be countable as income or as a resource therefore jeopardizing government benefit eligibility. This may result in reduction in or loss of SSI and\or MediCal eligibility.
The primary reason MediCal and SSI create a challenge is they are “means” tested, which means that eligibility is based on income and resources available to the injured party. First the applicant must be totally and permanently disabled and then they must meet strict asset and resource limitations. Medicare and Social Security Disability Insurance (SSDI) do not special protection because they are entitlements and therefore are not subject to income of recourse limitations.
The most common solution to the benefit eligibility protection is the use of Individual and/or Pooled Special Needs Trusts. We will explore how these trust vehicles and the use of structured settlements will help you better settle those challenging Elder Abuse Cases.
How do I protect my client’s benefit eligibility? A common strategy in these cases is to utilize an Individual or Pooled Special Needs Trust under Federal Statute 42 USC 1396.
What is the drawback to using Special Needs Trusts? The drawback to all Individual and Pooled SNT’s is the accrual of a MediCal lien that must be paid back from trust funds once the trust account is terminated. This lien is accrued from date of eligibility so it is not unusual for settlement funds to be exhausted when terminating the trust.
What size cases use an Individual SNT? Individual Special Needs Trusts are used for those settlements where the client will net at least a minimum of $250K or $500K depending on the corporate trustee’s requirements. YOUR CLIENT MUST BE UNDER AGE SIXTY-FIVE TO USE AN INDIVIDUAL SNT. Your client must have a living parent, grandparent or guardian to establish the trust unless you plan to petition the court. With a Pooled Trust the individual can establish the trust themselves. Individual SNT’s are drafted by a qualified Trust or Elderlaw attorney and can range in costs from $1,500 to $10,000 dollars and annual court accountings may be required.
What do I do if your client is under age sixty five and net settlement is less than $500K? Many different options are available to manage case that net less than is accepted by the traditional corporate trustee. Private Fiduciaries and third party trust administrators can be hired to administer the trusts at a lower cost than most corporate trustees. Pooled SNT programs can be used by a client of any age and they also do not usually require a minimum account balance. As a last resort you may utilize a family member or friend as a trustee but this has high risk and trustee selected must qualify to be bonded.
What if my client is over age sixty-five? Elder abuse cases often involve clients over the age of 65 years who cannot utilize an Individual Special Needs Trust (SNT), they must use a Pooled Special Needs Trusts (PSNT) which is established and managed by a charitable organization.
How to I choose the best Pooled Trust program for my client? One, be sure the trust program will let you negotiate the remainder interest. Two, they accept court ordered trusts. Three, they have experience working with settlement brokers and plaintiff firms. In this volatile market it is important to use a program that uses a national brokerage firm to hold assets and is fiscally viable. Many of these trust accounts are feed from annuities so long-term security is essential.
Why do Pooled Trust programs keep a percentage of the remainder when trust is terminated? PSNT programs are required by Federal Statute to have a “remainder, contingent or beneficial interest” in the trust to act as the Trustee for a Pooled SNT. The charity must receive some of the remaining funds in the trust once terminated for the trust to be valid.
What is the process for establishing a Pooled SNT? Pooled Trust programs are established and managed by charitable organizations. Usually these programs have a quick enrollment process. Unlike an Individual SNT, the Pooled Trust uses a master trust document and your client enrolls via a Joinder Agreement rather than having their own trust established. You may still want to consult a Trust or Elderl Law Attorney.
What role do Structured Settlements play in planning an Elder Abuse Case? Structures allow you to greatly reduced trust administration fees and tax liability. All SNT’s are “Grantor Trusts” and gains are taxable. Trust can be established with a smaller seed amount with the remaining funds paid through an annuity. This is where a Structured Settlement with a commutation rider becomes very important. There is no perfect solution in these cases but a common strategy to maximizing the benefit from the settlement for your client is to displace as much of the settlement to a surviving spouse when possible. Another solution is to incorporate the use of an annuity with small payments into the trust to minimize how fast funds are exhausted. The annuity must have a commutation rider so a lump sum payment is made after the trust is terminated. This lump sum payout is still subject to state lien payback. Have an attorney negotiate the lien payback to the state and once remainder portion has been paid to Medicaid the remaining funds can be transferred to heirs. NOTE some PSNT programs keep 100% of the remainder meaning no funds will go to heirs.
What if a spouse or dependent is disabled? Settlement funds may be subject to “Spouse-to-Spouse” or “Parent to Child” deeming whenever any spouse or dependent children are eligible for SSI. Any proceeds from the settlement can have a negative effect on a “Spouse or Disabled dependent”. These cases require careful planning and SNT’s still provide the same protection.
What considerations apply if the injured party is in a Nursing home? Any proceeds from a settlement may impact income or resource limits for MediCal and the client may have proceeds lost to nursing home as they increase patient responsibility amount per month if you disburse funds. Disbursing funds to spouse may still impact nursing home client’s patient responsibility amount.
[i] http://www.ssa.gov/dibplan/dqualify4.htm Disability Planner
William E. Lindahl, MBA, CLPF