THE PROBLEM
You’ve spent years fighting to get a settlement for your client. Finally there is a settlement. But the plaintiff was receiving MediCal benefits prior to the settlement so now doesn’t meet the criteria for continuing those benefits.  There is too much money coming in.  Thus the plaintiff is now forced to start paying private pay rates for care. The result is a significant loss of settlement proceeds.

One possible solution for clients under age sixty-five is an Individual Special Needs Trust. The trust can be used to keep eligibility and protect access to wholesale health care (MediCal/Medicaid). But, this can be expensive and time consuming as you wait for a trust to be drafted and a court date to obtain permission to establish the trust. In addition, it may be difficult to find a corporate trustee or bondable family member to act as trustee.  Then, if the individual is over the age of sixty-four an Individual Special Needs Trust cannot be used.

This is especially a problem in settling Elder Abuse Cases where the plaintiff is likely to be over age 64.  An individual SNT would not be an option.

So now what?
Solution:  A Pooled Special Needs Trust.  Any individual of any age can use a Pooled Special Needs Trust and, as long as the plaintiff has capacity, he can even establish the trust himself. The trust can be setup within days. Some Pooled Special Needs Providers will go on site to meet with the plaintiff and help them join the trust.  Also, no minimum funding amount is required.  The trusts are SPIC insured for up to $500,000 and all accounts are bondable.

Click here to view the decision matrix to help determine when a SNT is recommended.

Can I use a Structured Settlement with a SNT?  
Absolutely, structured payments are tax-free and they reduce the plaintiff’s taxable income from the trust.   Additionally, if the future payments are guaranteed, the guaranteed portion skips state lien payback.  The state can only recover monies to payback the lien from the funds in the trust, NOT future payments from the structured settlement.

Isn’t it hard to get money out of the trust?
Some programs require that the bill must be faxed or mailed to the trustee.  CPT Special Needs Trusts use Android & IOS apps so the client can just take pictures of the bills they want paid and send them from their phones or tablets.  All disbursements are then approved and paid within two business days.

What is the difference between a SNT and a Pooled SNT?
​Both protect Medi-Cal & Supplemental Security Income (SSI)
​and require state lien payback.

42 U.S.C. 1396p § (d)(4)(A) Trusts | 42 U.S.C. 1396p § (d)(4)(C) Trusts
Separate trusts are drafted | CPT State Master Trust
Must be under age 65 | Any age
No additional funds after age 65 | Single funding after age 65 
Setup cost varies by trust attorney| Setup up to $3,000
Trust creation varies by trust attorney | Receive Trust documents immediately

The settlement proceeds are irrevocably transferred or assigned into a trust authorized under federal law at 1917(d)(4)(C) of the Social Security Act (the Act) (42 U.S.C. 1396p(d)(4)(C)) commonly called a Pooled Special Needs Trust.

The assets of a Pooled Special Needs Trust are unavailable according to the Federal Omnibus Budget Reconciliation Act of 1993, California Administrative Code, 22 CCR §50489.9, and Article 9JV of the Medi-Cal/Medicaid Eligibility Procedures Manual, since the trust is irrevocable and trust distributions cannot be made directly to the plaintiff, but only to a third party to provide for special and supplemental needs. As a result of this transfer into the Pooled Special Needs Trust, the funds contributed will not count as income or as a resource for purposes of determining MediCal/Medicaid eligibility.

But aren’t Special Needs Trusts too restrictive?    
The primary rule for any SNT is that the funds must be spent on the disabled/injured party.  This is the only real restriction, because there are options that allow a SNT to pay for rent, groceries and/or other shelter-related expenses.  Essentially, the charity acts as a bill paying service for the plaintiff and they can now spend their settlement proceeds as they like. Click here for information on Allowable Distributions.

It is also important to note that the funds in any special needs trust supplement do not supplant government benefits. In other words, the special needs trust is designed to provide financial assistance for any care above and beyond what the government provides.

What are the legal requirements of establishing a Pooled Special Needs Trust?
The Pooled Special Needs Trust is an exempt asset for purposes of calculating eligibility for needs-based public benefits, like SSI and Medicaid.  To meet the legal requirements of a Pooled Special Needs Trust, as stated in 22 CCR §50489.9(a)(4), the Trust must meet the following conditions:

  1. The trust contains the assets of the individual who is disabled in accordance with Section 50167(a)(1);
  2. The trust is established and managed by a nonprofit association;
  3. A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts;
  4. Accounts in the trust are established solely for the benefit of individuals who are disabled and can be established by the disabled individual, his or her parent, grandparent, or legal guardian, or by a court; and
  5. The State receives, upon the death of the disabled individual, all funds remaining in the individual’s account, up to an amount equal to the total amount of medical assistance paid on behalf of the disabled individual by the Medicaid program. The State shall receive this amount only to the extent that funds remain in that individual’s account and are not retained by the trust to cover management and investment fees associated with the account.

What happens to the money after the client dies?
All SNT are required to pay the state lien back for MediCal related expenses, then the remaining funds to the plaintiff’s heirs or named beneficiaries.

DISCLAIMER The following forms are provided by CPT for informational purposes only and are intended to be used as a guide prior to consultation with an attorney familiar with your specific legal situation. CPT is not engaged in rendering legal advice, and this form is not a substitute for the advice of an attorney. If you require legal advice, you should seek the services of an attorney. © 2017 CPT All rights reserved.